Investing.com - Khalid al-Falih should be smiling.
The Saudi Energy Minister's squeeze on oil exports is making a greater mark in weekly U.S. data. The latest statistics from the U.S. Energy Information Administration show a drop of more than 1 million barrels last week that took the kingdom's shipments to the United States to near-decade lows.
Oil prices, already trending higher on sanctions imposed on Venezuelan oil by the Trump administration, rallied for a second day running, with West Texas Intermediate crude, particularly, hitting 10-week highs that just fell short of $55 per barrel.
New York-traded WTI settled up by 92 cents, or 1.7%, at $54.23 per barrel after reaching a session peak of $54.92. The last time WTI hit such highs was on Nov. 20.
London-traded Brent, the global oil benchmark, was up 42 cents, or 0.7%, at $61.62 by 2:45 PM ET (19:45 GMT). Its session high was $62.50.
Crude prices as a whole surged as U.S. refiners scrambled for domestic sources of sulfur-laden oil, also known as sour crude, that's needed for making diesel and other transportation fuels. Sour crude typically comes from origins like Venezuela, Mexico, Canada, Saudi Arabia and other Middle East destinations. Scarcity of these heavier oils have caused them to fetch premiums of more than $7 per barrel against lighter variants like WTI over the past week.
The EIA data show that "the precipitous drop in imports from both the Saudis and the Middle East has helped stave off another big build to crude stocks," said Matthew Smith at New York-based crude cargoes tracker Clipperdata.
"A plunge in refining activity, a seasonal trend as we dive into seasonal maintenance, has also yielded the first weekly drop in five for gasoline inventories," he added.
The EIA reported that U.S. crude inventories as a whole rose by 919,000 barrels for the week ended Jan. 25, versus analysts' expectations for a rise of 3.2 million. In the previous week to Jan. 18, crude inventories rose by a huge, unexpected 8 million barrels.
The EIA data showed last week's smaller build was directly related to a slump of 1.1 million barrels in imports. A Bloomberg chart on weekly U.S. crude imports showed the latest intake from Saudi Arabia at 442,000 barrels, the lowest since 2010.
The crude inventory drop included a 145,000-barrel decline in stockpiles at the Cushing, Okla. delivery hub for WTI, which is closely watched by the market.
Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, North Carolina said aside from land-based crude storage, crude in transit, or shipment, was also declining from OPEC cuts and while the market was focused on EIA data, "perhaps we are supposed to look a bit deeper at floating storage and oil on the water as indication of what is to come rather than what happened last week".
Shelton added: "I continually hear that the Saudis are struggling with capacity after going to max exports and drawing down inventories ... that their spare capacity is now limited to less than 11 million barrels per day."
Al-Falih told a recent Bloomberg Television interview that while Saudi Arabia agreed at the December meeting of producer club OPEC+ to produce only 10.33 million bpd a month, the actual amount it will pump for the next six months will be "well below" that, beginning with 10.2 million in January and 10.1 million in February.
Aside from last week's crude inventory drop, the EIA also reported that gasoline stockpiles fell by 2.2 million versus forecasts for a gain of 1.9 million barrels. Gasoline inventories jumped 4 million in the previous week to reach a record high of almost 260 million barrels. Last week's drop, the first in nine weeks, came as refinery runs fell by 586,000 barrels to just at about 90% of their capacity, versus typical run rates of 96% and above.
Inventories of distillates, which produce diesel and other commercial fuels, decreased by 1.1 million barrels, falling for a second week in a row after the squeeze on sour crudes. Analysts had expected distillates to show a 1.4 million barrel decline. In the previous week distillates fell by 620,000 barrels.