Oil closed above $63 a barrel for the first time in over three years as crude stockpiles stowed in American tanks and terminals dwindled for an eighth straight week.
Futures rose 1% in New York after the U.S. government said refiners and exporters withdrew almost 5 million barrels from storage last week. While the draw was smaller than the 11.2 million barrels reported in an industry tally on Tuesday, it still was the largest for this time of year since 2014. The last time winter stockpiles shrank at this pace was a decade ago.
Even though investors were expecting a massive draw, "it was still a very sizable one," said Rob Thummel, managing director at Tortoise Capital Advisors LLC, which handles $16 billion in energy-related assets. We're seeing "falling inventories and rising geopolitical risk and that signals higher oil prices ."
Prices have surged amid renewed optimism that cutbacks by the Organization of Petroleum Exporting Countries and its partners are helping to drain a global glut. Tempering the rally is the concern that shale producers will boost U.S. output, which the EIA expects to top 11 million barrels a day in November 2019.
OPEC would try to talk down a Brent rally above $70 to cushion the impact on the global economy and rival supplies, Goldman Sachs Group Inc. said. Citigroup Inc., on the other hand, predicted that war, Middle East tensions, Donald Trump and Kim Jong Un could drive crude toward $80.
West Texas Intermediate for February delivery advanced 61 cents to settle at $63.57 a barrel on the New York Mercantile Exchange. Total volume traded was about 23% above the 100-day average.
Brent for March settlement climbed 38 cents to end the session at $69.20 on the London-based ICE Futures Europe exchange, the highest level since December 2014. The global benchmark crude was at a premium of $5.78 to March WTI.
U.S. crude inventories fell to 419.5 million barrels last week, the Energy Information Administration said on Wednesday. Stockpiles in Cushing, Oklahoma, the nation's biggest oil-storage hub, fell for a third week to the lowest in almost three years, while crude production ticked lower. As for fuels, the report showed a rise in gasoline and diesel supplies.
"The inventory report still shows that crude stocks are plummeting like a stone," Adam Wise, who oversees an $8 billion energy portfolio at John Hancock Financial Services Inc. in Boston, said by telephone. Other factors driving crude's rally to three-year highs include a stronger global economy and OPEC's adherence to output cuts, he said.