U.S. oil prices rose to a new 2015 high Wednesday after U.S. data showed stronger-than-expected demand for crude oil and gasoline.
Prices have wavered in recent weeks, pivoting around $60 a barrel as investors weighed a continued oversupply of oil against signs of stronger demand and expectations that output may be shrinking.
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U.S. crude-oil stockpiles dropped by 6.8 million barrels in the week ended June 5 to 470.6 million barrels, the U.S. Energy Information Administration said Wednesday. Analysts surveyed by The Wall Street Journal had predicted a 1.8-million-barrel decrease on the week.
It was the biggest weekly drop in stockpiles since last July and the sixth- straight decline since stockpiles hit their highest level in more than 80 years in April.
The decline was due to a large drop in imports, as wildfires halted some Canadian production, and increased refinery activity.
Light, sweet crude for July delivery settled up $1.29, or 2.1%, at $61.43 a barrel on the New York Mercantile Exchange, the highest settlement since Dec. 9. Brent, the global benchmark, rose 82 cents, or 1.3%, to $65.70 a barrel on ICE Futures Europe.
Prices retreated slightly from intraday highs as traders looked at production data, which showed that U.S. oil output rose last week to 9.5 million barrels a day, a record high in weekly data.
"This price action has not convinced me yet that we're off to the races, " said Tariq Zahir, managing member of Tyche Capital Advisors. "We're still awash in crude."
Analysts expect crude-oil supplies to continue to shrink this summer, as refineries run at high rates to turn crude oil into gasoline and other fuels. On the Gulf Coast, where most domestic refineries are located, refiners ran at 98.4% of capacity, a record high.
"I would not be surprised to see another...20 to 30 million barrels being pulled out of storage" in the coming weeks, said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy-trading desk.
Inventories are still 22% higher than a year ago.
This week's drawdown is "just taking us from an extremely high level--record inventories--to less than record," Mr. Morton said. "It's not creating a shortage by any means."
Some U.S. companies have said that if prices hold above $60 a barrel, they can increase production.
"When we get up here, we start to get more of this talk about, will domestic production start to be incentivized again," said Matt Smith, director of commodity research at data provider ClipperData. "We need something more to really drive us on from here to new highs."
Gasoline stockpiles fell by 2.9 million barrels. Demand for gasoline averaged 9.6 million barrels a day, up from 8.6 million barrels a day a year ago.
Gasoline futures settled up 6.93 cents, or 3.3%, at $2.1464 a gallon, the highest settlement since Oct. 31.
Distillate stocks, which include heating oil and diesel fuel, rose 865,000 barrels.
Distillate futures rose 2.80 cents, or 1.5%, to $1.9459 a gallon.
Earlier Wednesday, the Organization of the Petroleum Exporting Countries' monthly supply-and-demand report called for the global glut of oil to shrink in the coming quarters. However, the cartel also said its own production rose to 30.98 million barrels a day May, nearly a million barrels a day above the target it set last week.
A weaker dollar also boosted oil prices. Dollar-priced commodities such as oil become cheaper for holders of other currencies as the dollar depreciates. The Wall Street Journal Dollar Index, which tracks the greenback against a basket of 16 major currencies, recently fell 0.7%.
(By Nicole Friedman)