Light, sweet crude for July delivery settled 43 cents, or 0.5%, higher at $93.74 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange fell 20 cents, or 0.2%, to settle at $103.04 a barrel.
About 6.3 million barrels were drawn from crude-oil stockpiles last week, the Energy Information Administration reported, outpacing the 400,000-barrel decline projected by analysts in a Dow Jones Newswires survey. It was the biggest drop in stockpiles this year.
“The market did not expect such a large crude draw,” said Tony Headrick, energy market analyst at CHS Hedging. “But the market did not shoot higher because supplies are [still] ample.”
Oil stockpiles had been steadily rising, reaching their highest level since May 1931 in the prior week. Last week’s pick-up in demand from refineries and a 7% drop in crude-oil imports helped reverse the trend.
In a sign of the shifting U.S. oil landscape, the volume of crude oil produced in the U.S. last week outpaced oil imports for the first time since January 1997. Domestic production surged to 7.3 million barrels a day in the week ended May 31, helped by surging flows from shale fields, while oil imports were at their lowest since September 2008.
Rising domestic production is helping to cushion the market against higher prices. Nymex crude, the U.S. benchmark, is little changed since the start of the year, while Brent crude is down about 7%.
Oil stockpiles now stand at 391.3 million barrels, 1.7% above last year’s level. “Crude-oil inventories are still exorbitantly high and it’s a big cost of capital having all that crude just sitting there,” said Kyle Cooper, managing partner at IAF Advisors in Houston.
Refineries are processing more crude now that the summer driving season is under way. Refineries used 88.4% of their total capacity last week, the EIA reported, up two percentage points from the previous week. Analysts were expecting just a half-percentage-point rise.
Gasoline stockpiles last week fell 400,000 barrels, according to the EIA. Inventories of distillates, including heating oil and diesel, rose 2.6 million barrels, as demand for those products declines with the warmer weather across the U.S.
Later this week, oil market watchers are likely to shift their attention the monthly U.S. nonfarm payrolls report for clues on the health of the job market in the world’s biggest oil consumer. Steadily high unemployment in the U.S. has kept fuel demand restrained with fewer motorists on the road.
Earlier Wednesday, payroll processor Automatic Data Processing Inc. reported private-sector employers added 135,000 jobs last month. The figure was below expectations for a gain of 170,000 private jobs, while the April employment increase was revised down to 113,000 from 119,000 reported a month ago.
Front-month July reformulated gasoline blendstock, or RBOB, settled 0.48 cent, or 0.2%, higher at $2.8230 a gallon. July heating oil settled 0.95 cent, or 0.3%, lower at $2.8554 a gallon.
*Dan Strumpf, Dow Jones Newswires