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Oil hit close to $50 per barrel overnight, riding high on preliminary inventory data that showed an over 5-million-barrel dip in crude stockpiles and reaching a 7-month high.
West Texas Intermediate (WTI) was up 2.5 percent, to US$49.27 per barrel in afternoon trading yesterday, hitting a point higher than anything seen since last October.
By early morning, WTI was quoted as high as US$ 49.45, dipping down to US$49.11, but holding firm ahead of anticipation that the U.S. Energy Information Administration (EIA) will come out with official data this afternoon supporting yesterday’s inventory draw data from the American Petroleum Institute (API).
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The last time WTI hit $50 was 21 July 2015.
Brent crude hit US$49.24 in yesterday’s trading. It was sitting at around US$49.10 in early morning trading Wednesday.
A Reuters poll suggested that the data would show that stocks had fallen by 2.5m barrels from 541.3m barrels earlier this month.
On Tuesday, the API said that U.S. crude oil supplies had fallen by 5.1 million barrels for the week ending in May 20th, causing the largest inventory draw since December 2015.
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Zero Hedge pointed out a seasonal trend for large draws in May. Last year, crude oil experienced a draw of 16.4 million barrels around the same time of the current month.
Oil supplies at Cushing, Oklahoma dropped by 189,000 barrels - the first in four weeks. Distillate supplies decreased by almost three million barrels. Gasoline inventories, on the other hand, rose dramatically with a build of 3.6 million barrels instead of a draw of 1.5 million.
Ahead of the data, the anticipated reduction in supply caused crude prices to jump over US$49 a barrel. It was expected that the draw would be two million barrels or less.
By Charles Kennedy of Oilprice.com
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Charles is a writer for Oilprice.com