Massive U.S. Stock Draw Triggers 2% Rise In Oil Prices

Meanwhile, a new report shows the Russia price caps to be a bust: File Image/Pixabay

Another crude stock drawdown so big that even skittish oil traders couldn’t ignore prompted them on Wednesday to abandon their bearish proclivities – although likely temporarily – and caused prices to rise 2 percent.

Contrary to expectations for an 800,000 barrel rise, the Energy Information Administration reported that U.S. crude inventories posted a massive weekly drawdown of 12.5 million barrels to 455.2 million barrels.

Gasoline stocks dropped by 2.1 million barrels in the week to 216.3 million barrels, while distillates fell by 600,000 barrels to 105.7 million barrels.

That’s not all: Phil Flynn, senior market analyst at Price Futures Group Inc., said, “Refiners are absolutely going max out with refinery runs right now, trying to keep up with demand.”

Flynn added that traders were so focused on interest rates and the U.S. debt ceiling they overlooked that the demand side has been tightening for the past few weeks.

For the record, traders on Wednesday tended to downplay yet another day of no progress in debt ceiling talks as the deadline approaches to either raise Washington’s borrowing limit or risk default.

Brent rose $1.52, or 2 percent, to settle at $78.36 per barrel, while West Texas Intermediate gained $1.43, also 2 percent, to $74.34.

Still, oil is down around 7 percent for the year due to disappointment over China’s post-Covid economic recovery and interest-rate hikes from the U.S. Federal Reserve.

In other oil related news on Wednesday, a study from the Centre for Research on Energy and Clean Air showed that Russia’s revenues from oil exports have recovered from levels reached in January and February and that oil tax revenues rose 6 percent month on month in April due to the increase of export revenues in March.

Lauri Myllyvirta, lead analyst at CREA, pointed out that “Russia was able to export its main crude oil variety, for the first time, at prices that were systematically above the price cap level set by the U.S., EU and allies.

“Unless gaps in enforcement are fixed urgently, this risks breaking the price cap mechanism for good.”

Less than a week ago, Group of Seven leaders Japan said that the price cap on Russian oil and petroleum products was working, Russian revenues were down, and falling oil and gas prices were benefiting countries around the world.