Crude oil prices and energy-related exchange traded funds (ETFs) jumped Wednesday after an unexpected dip in U.S. crude oil inventories.
The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, rose 3.6% Monday while the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, gained 3.8%. BNO also broke back above its resistance at the 200-day simple moving average. Year-to-date, USO dipped 0.1% and BNO increased 14.1%.
Meanwhile, WTI crude oil futures were 3.1% higher to $46.1 per barrel and Brent oil was up 3.7% to $47.2 per barrel.
Energy futures started the day off in the red but quickly pared losses and surged higher, following the Energy Information Administration’s announcement that crude oil stockpiles declined by 3.4 million barrels in the week ended May 6, compared to analysts expectations of a 400,000 barrel rise, reports Nicole Friedman for the Wall Street Journal.
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The EIA also calculated that U.S. crude oil production slipped to 8.8 million barrels per day, the lowest level since September 2014.
Nevertheless, U.S. crude oil inventories are still near their highest level in mover 80 years, reflecting the ongoing global supply glut that has pressured prices since 2014.
[related_stories]Energy stockpiles typically recede at this time of the year as refineries complete seasonal maintenance and process oil into refined products, like gasoline.
Looking ahead, analysts believe imports could also dip ahead after wildfires in Canada that prompted some companies to stop oil sands production. More than 1 million barrels of oil per day has been offline due to the fires in oil-rich Alberta.
Related: Canadian Wildfires Help Pare Oil ETF Losses on Saudi Arabia’s Ministry Changes
“We should see pipeline flows drop in the coming two weeks,” Matt Smith, director of commodity research at shipping tracker ClipperData, told the WSJ.
In overseas markets, Nigeria production problems have also helped support prices. On top of large pipeline that was already shut down, Shell Petroleum Development Co. of Nigeria halted exports from a pipeline that carries 150,000 barrels per day of oil due to a leak.
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Moreover, political volatility in Libya has also helped support oil prices. Last week, a major port was blocked, reducing the country’s oil production by 140,000 barrels to 220,000 barrels per day.
Potential traders, though, should keep in mind that these disruptions may be short-lived and ongoing output from major Organization of Petroleum Exporting Countries, like Saudi Arabia and Iran, will pressure prices.
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