U.S. Oil Price Jumps to Largest One-Day Gain in Nearly Two Months

Strategic Insights -

The U.S. oil price surged to its largest one-day gain in nearly two months, driven by a decline in U.S. crude-oil output and a weaker dollar. The benchmark U.S. crude price jumped 5.2% to $50.09 a barrel on the New York Mercantile Exchange, while Brent, the global benchmark, rose 3.6% to $57.10 a barrel on ICE Futures Europe. Energy experts and analysts believe that this decline could indicate that an oil glut, which sent prices to a six-year low earlier this year, is easing. However, some traders remain cautious, pointing to record-high crude-oil stockpiles and the uncertainty surrounding an Iran deal as reasons to remain bearish on oil.

Key Takeaways:

  • U.S. crude-oil output fell by 0.4% or 36,000 barrels a day last week, marking the first decline since January, according to preliminary data from the U.S. Energy Information Administration (EIA).
  • The rate of U.S. crude-oil output has been cut back as energy companies announced billions of dollars of spending cuts and reduced the number of rigs used for drilling oil wells.
  • Oil prices rose on Wednesday after the EIA reported a decline in U.S. crude-oil output, with the benchmark U.S. crude price jumping 5.2% to $50.09 a barrel on the New York Mercantile Exchange.
  • Brent, the global benchmark, rose 3.6% to $57.10 a barrel on ICE Futures Europe, driven by a decline in U.S. crude-oil output and a weaker dollar.
  • Crude-oil stockpiles rose for a 12th straight week to 471.4 million barrels, a record in weekly data, according to the EIA.
  • Cushing supplies rose by 2.6 million last week to 58.9 million barrels, the highest level on record, the EIA said.
  • If Cushing storage levels hit maximum capacity, it could weigh on prices as sellers cut prices to attract buyers with space left to store oil.
  • U.S. oil output slipped by 36,000 barrels a day last week from multidecade highs the previous week, according to the EIA, with Andy Lipow, president of Lipow Oil Associates, saying "Perhaps this is the first sign of a leveling off of oil production in the U.S."

Statistics:

  • U.S. crude-oil output fell by 0.4% or 36,000 barrels a day last week, according to preliminary data from the EIA.
  • Crude-oil stockpiles rose for a 12th straight week to 471.4 million barrels, a record in weekly data, according to the EIA.
  • Cushing supplies rose by 2.6 million last week to 58.9 million barrels, the highest level on record, the EIA said.
  • Brent, the global benchmark, rose 3.6% to $57.10 a barrel on ICE Futures Europe on Wednesday.
  • U.S. oil prices rose by 5.2% to $50.09 a barrel on the New York Mercantile Exchange on Wednesday.

Sources:

  • U.S. Energy Information Administration (EIA)
  • Lipow Oil Associates
  • Cohen & Steers Inc.
  • Herbert J. Sims & Co.
  • Loomis, Sayles & Co.
  • SyndiGate Media Inc. (Syndigate.info)
  • ICE Futures Europe
  • New York Mercantile Exchange