After tumbling the first half this year, Oil price got a big move today due to the EIA report. Oil jumped more than $1 a barrel after the biggest drawdown in U.S. crude inventories in 17 years. However this reversal is not convincible to the market where all investors are expecting a pain year. The crazy production not only in Mideast but also around the world is pushing the profits of energy sector to zero. Shale Oil revolution make the US one of the largest oil exporter in the world and coming with this activity is the consistent oversupply. Now the demand is even worse since the global trade is cooling down along with growth concerns for all countries.
Crude inventories fell 14.5 million barrels last week, according to the Energy Information Administration. That was the biggest drop since January 1999. A 905,000-barrel gain was projected by analysts surveyed by Bloomberg before the release. Tropical Storm Hermine moved into the Gulf of Mexico on Aug. 28, disrupting shipping and output before moving northeast. Imports tumbled 1.85 million barrels.
“The huge number is clearly a result of storm activity in the Gulf,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “It’s a fluke but, all the same, prices are going to move higher in the short term.”
West Texas Intermediate for October delivery rose $1.69, or 3.7 percent, to $47.19 a barrel at 11:36 a.m. on the New York Mercantile Exchange. Futures touched $47.43, the highest since Aug. 30.
Brent for November settlement climbed $1.65, or 3.4 percent, to $49.63 a barrel on the London-based ICE Futures Europe exchange.
U.S. crude supplies declined to 511.4 million in the week ended Sept. 2, according to EIA data. Inventories reached 543.4 million barrels in the week ended April 29, the highest since 1929. The stockpiles remain at their highest seasonal level in more than 20 years.
“One data point does not a make a trend,” said Mark Watkins, the Park City, Utah-based regional investment manager for The Private Client Group of U.S. Bank, which oversees $133 billion in assets. “We will have to see if this continues before getting too concerned.”
The extreme weather will not visit US every week to force the oil inventory down in the future. In the coming weeks, it will be more clear how much inventory cut was due to the weather and what’s the actual inventory level for US.