Official government data released Wednesday showed a larger-than-expected fall in U.S. crude inventories, sparking a turnaround in oil prices.
The Energy Information Administration said in its regular weekly report that crude oil inventories decreased by 3.11 million barrels in the week to June 14.
That was compared to forecasts for a stockpile draw of 1.08 million barrels after a build of 2.21 million barrels in the previous week.
The EIA report also showed that gasoline inventories unexpectedly decreased by 1.69 million barrels, compared to expectations for a gain of 0.94 million barrels, while distillate stockpiles dropped by 0.55 million barrels, compared to forecasts for a build of 0.71 million.
U.S. crude prices turned around and headed higher immediately folllowing the bullish report. They were last up 0.6% at $54.41 a barrel by 10:50 AM ET (14:50 GMT), compared to $53.66 prior to the publication.
London-traded Brent crude futures rose 0.4% to $62.41 a barrel, compared to $61.63 ahead of the release.
“After what seemed like an eternity, the bulls have got their first break for the summer run of both crude and products,” Investing.com senior commodity analyst Barani Krishnan commented on the report.
Krishnan noted, however, that the limited upside reaction to the numbers was due to the fact that stockpiles remain restrained by builds seen in previous weeks and the fact that “the market's waiting for the Fed to see if the other big thing for the day - a rate-cut complementing statement - comes in.”
“But it’s an all-round encouraging number if you consider that production didn’t go ramping up, Cushing built by just around 700,000 barrels, exports were steady and refinery runs are closing in on the seasonal rate of 95% and above to capacity,” he explained.
Earlier, oil had traded lower as investors took profits. U.S. crude surged nearly 4% on Tuesday after U.S. President Donald Trump revived hopes that a trade deal could be made with China.
Trump tweeted that he had a good conversation with Chinese President Xi Jinping and trade negotiations were planned to restart ahead of an “extended meeting” between the two world leaders at the G20 summit next week.
The more upbeat tone sent a sigh of relief through oil markets as it reduced the danger of an economic fallout that could hamper demand for crude.
Elsewhere, and at first glance, the fact that OPEC finally managed to reset the dates for its meeting to extend the agreement on production cuts would be seen as a bullish sign.
After months of bickering, OPEC members finally agreed on Wednesday to push back their official meeting to July 1, followed by a meeting with non-OPEC allies on July 2, switching from previously agreed dates of June 25-26.
However, OPEC sources told Reuters that the difficulty in obtaining the delay was a sign that future meetings and decisions could be even more difficult.
Iran was blamed as the wrench in the works as it seeks a bigger say under the pressure of U.S. sanctions.
“An emboldened Iran could complicate matters for OPEC next month,” Krishnan said.
“It could use its position as one of the cartel’s original five founding members to block any consensus from easily being reached by the 14-nation grouping, which largely takes its direction from Saudi Energy Minister Khalid al-Falih and his UAE counterpart Suhail al-Mazroui,” he explained.