Investing.com -- Oil prices closed up almost 3% Wednesday as technical buying kicked in after U.S. crude dropped to the psychological $70 per barrel support.
The rally overlooked a government report showing the biggest weekly crude inventory build in three months in the United States, during a period that usually sees greater oil consumption ahead of the typical summer surge in road, air and seaborne travel.
Oil prices also appeared to rise on optimism expressed by President Joe Biden about the White House’s chances of securing through negotiations with Republican rivals in Congress a higher debt ceiling by this weekend for the government to pay for its obligations. Fears of a historic U.S. default on its debt by June 1 had depressed risk-taking across markets this week, including in oil.
New York-traded West Texas Intermediate, or WTI, crude settled up $1.97, or 2.8%, at $72.83 per barrel after hitting a session low of $70.05.
London-traded Brent crude, the global benchmark for oil, finished Wednesday's trading up $2.05, or 2.7%, at $76.97 after an intraday low at $74.11.
Stockpiles of U.S. crude rose last week for their largest build in a week since February while fuel demand was mixed, according to the Energy Information Administration, or EIA, which serves as the statistical arm of the Department of Energy.
The U.S. crude inventory balance rose by 5.040 million barrels during the week ended May 12, the EIA said in its Weekly Petroleum Status Report.
The increase adds to the previous build of 2.951M barrels reported by the EIA for the week ended May 5.
EIA historical data showed the last time there was such a huge weekly build was during the week ended Feb. 18, when crude stockpiles rose by 7.648M barrels.
Industry analysts tracked by Investing.com had forecast an inventory slide of 0.920M barrels instead during the latest week.
The crude build for the latest week, however, comes with a usual caveat: the release of 2.4M barrels from the Strategic Petroleum Reserve without which the inventory balance might have been just around 2.6M barrels.
Crude releases from the U.S. reserve have been a challenge to oil bulls as the Biden administration sought to continuously moderate market optimism to prevent prices of both oil and fuel at the pump from rising too much to add to already high inflation.
The administration has drawn almost 250M barrels from the SPR over the past 18 months, bringing pump prices of gasoline in the United States to around $3.50 per gallon on the average from a June 2022 record high of $5.
But the crude build itself did not necessarily make for a bearish reading on oil.
Exports of crude jumped last week to 4.3M barrels from the previous week’s 2.876M, an increase of 1.434M.
U.S. refinery run rates, meanwhile, stood at 92%. “Anytime you have a run rate above 90%, it means throughput for crude is approaching max out,” said John Kilduff, founding partner at New York energy hedge fund Again Capital. “So, it’s hard to make a simple case of bearish or bullish for this EIA report.”
Also, demand for fuels last week was mixed, bucking to an extent greater consumption ahead of the typical summer surge in road, air and seaborne travel.
The EIA reported a gasoline inventory draw of 1.381M for the week ended May 12, versus forecasts for a drop of 1.060M barrels. In the previous week to May 5, there was a deficit of 3.168M barrels. The four-week gasoline product supplied - a proxy for demand - rose to its highest level since December 2021. Automotive fuel gasoline is the No. 1 U.S. fuel product.
On distillate stockpiles, the EIA cited a build of 0.080M barrels last week versus expectations for a build of 0.057M barrels. In the prior week, distillates saw a huge slide of 4.170M. Distillates are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets.