Oil’s Bounce Continues as Inventories Plunge Most in 17 Years

From OilPrice.com: U.S. crude inventories collapsed by 12 million barrels this week, marking the largest inventory draw since January 1999, according to analysis of this week’s American Petroleum Institute inventory report by ZeroHedge.

Brent oil prices had hovered around $47.92 before the API figures became public Wednesday afternoon, which caused the price to spike above $48.54 a barrel within five minutes of the release.

Also, barrel prices for West Texas Intermediate jumped to $46.14 from $45.48 after the weekly numbers were released.

Thursday’s Energy Information Administration data will include the government’s official inventory statistics, which do not always jive with the API report’s estimates, adding another layer of volatility to oil prices.

Analysts had expected crude inventories to rise by 905,000 barrels this week, after seeing builds in five of the past six weeks.

ZeroHedge said the massive draw could have been caused by a series of shut-ins at drilling sites in the Gulf of Mexico due to unstable weather conditions. The site cited an incident in 2013 when a 10 million barrel draw occurred as a result of a strong storm.

“We’ll need to see a significant shock to the market to break out of this range over the next several weeks.” Michael Tran, a commodities strategist at RBC Capital Markets in New York told ZeroHedge over the phone before the report was released. It seems the API report provided the shock Tran had hoped for.

According to the report, gasoline reserves fell farther than the expected 750,000 barrels; the inventories saw a deeper 2.4 million barrel draw instead. In contrast, distillate reserves jumped by 944,000 barrels.

Crude reserves in Cushing fell by 700,000 barrels against an expected 900,000 barrel draw.

The United States Oil Fund LP ETF (NYSE:USO) rose $0.20 (+1.90%) to $10.72 per share in premarket trading Wednesday. The largest ETF tied to WTI crude oil is still down about 4.36% year-to-date, however.

On the leveraged side of things, the VelocityShares 3x Long Crude Oil ETN (NYSE:UWTI) surged $1.36 (+6.13%) to $23.56. The triple-leveraged oil bull play has plunged 43.8% since the start of 2016.

This article is brought to you courtesy of OilPrice.com.

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