Oil Hits 6-Month High on Crude Inventory Draw

Crude oil futures rose 3.5 percent in mid-afternoon trading on Wednesday, following official data earlier in the day showing a 3.4-million drop in crude inventories and a fall in crude output to 8.8 million barrels per day, the lowest since the fourth quarter of 2014.

June deliveries of West Texas Intermediate (WTI) were up US$1.57, or 3.5 percent, settling at US$46.23 per barrel on the New York exchange.

This jump is higher than any closing price the commodity has seen since November of last year.

July deliveries for Brent crude rose US$1.63, or 3.6 percent, to $47.15 per barrel on the London-based ICE Futures Europe exchange.

Exchange-traded funds (ETFs) experienced one of the most dramatic trading days, starting off the morning in the red but making up for that following the Energy Information Administration’s (EIA) inventory data release.

Related: Global Rig Count Continues To Fall

The United States Oil Fund (NYSEARCA:USO), tracking WTI futures, jumped 3.18 percent, while the Brent tracker, the United States Brent Oil Fund (NYSEARCA:BNO) rose 3.94 percent.

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Related: Russian Oil Executives Not Optimistic About Oil Prices

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According to the EIA, U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.4 million barrels from the previous week. At 540.0 million barrels, U.S. crude oil inventories remain at historically high levels for this time of year.

Markets were in a state of confusion yesterday and today, following the Tuesday report from the American Petroleum Institute (API), showing a 3.45-million-barrel oil inventory build—which would have been the highest in five weeks, though the release of the EIA report indicating a similar figure but in the opposite direction, revived hopes and sent prices soaring later in the day.

By Charles Kennedy of Oilprice.com

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