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Oil prices spiked on Friday morning as a series of outages, lower supply and stockpile draws saw confidence grow amongst crude traders.
Both WTI and Brent were up 6.8 percent and 6.3 percent respectively at 12:00 PM CST reaching a two-week high.
U.S. distillate prices also rose sharply with unleaded gasoline futures rising over 5.5 percent and heating oil jumping over 7 percent as weather forecasts for late April indicate an unusually cold start to spring.
Related: Crude Rally Pauses After Strong Gains
Solid gasoline demand in the U.S. has prevented crude oil from falling further in recent weeks and is expected to continue to show strength throughout April.
Scott Shelton, an energy broker with ICAP in Durham, NC told Reuters that he sees refinery run rates increasing and U.S. output falling. This is in line with the surprise draw to U.S. stockpiles of almost 5 million barrels that the EIA reported earlier this week.
Whereas back in February and March, U.S. crude imports caused inventories to rise and keep up the pressure on oil prices, it seems that we are also seeing a downward trend in U.S. imports, with 7.25 million barrels per day imported over the week ending the 4th of April versus nearly 7.75 million barrels per day imported the week before.
Related: Are The Saudis And Russians Deliberately Sabotaging Doha?
Another reason for the drop in U.S. inventories is the temporary shutdown of the Keystone pipeline, which transports Canadian oil from Alberta to Cushing Oklahoma, after a 400 barrel oil spill in South Dakota. Analysts do not expect this shutdown to have long-term consequences as the U.S. market is still grossly oversupplied.
On a final note, while total U.S. crude stocks remain well above their 5 year moving average at 530 million barrels, U.S. crude production continues to fall towards 9 million barrels per day, leading to further tightening of the oil markets ahead of the OPEC-orchestrated meeting in Doha on April 17.
By Tom Kool of Oilprice.com
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Tom majored in International Business at Amsterdam’s Higher School of Economics, he is now working as deputy news editor for Oilprice.com.