AtlantisFX | Oil prices rose a good 3 percent on Wednesday after the US government announced a four-times larger than anticipated fall in US crude oil inventories. This was the biggest destocking since September 2016, which could shake the oil market, which fell a week ago into a bear market, to its foundations.
Prices for the US West Texas Intermediate rose $ 1.55 or 2.7 percent to $ 59.38. On a weekly basis, US oil climbed 3.4 percent, following a price increase of 9.4 percent last week.
Prices for the North Sea Brent climbed $ 1.31 or 2.2 percent to $ 65.69. The September delivery contract rose 1.9 percent on a weekly basis, after a 5 percent rise in the previous week.
In comparison with the previous year, the price increase for the US variety WTI amounts to 31 percent and for Brent to 22 percent.
It was only in May that both WTI and Brent threatened to fall into a bear market after losing both varieties by as much as 20 percent over annual highs, as the US Department of Energy prior to the summer - the strongest period for gasoline demand in the United States - reported an unusually strong increase in crude oil stocks.
But in its latest report, the EIA said crude oil inventories fell 12.79 million barrels during the week ended June 21. By contrast, oil market observers had expected only a decline of 2.54 million barrels.
The EIA report also showed that gasoline inventories dropped unexpectedly by 1.0 million barrels. The distillate stocks dropped by 2.4 million barrels.
"The data was definitely a positive surprise on all fronts," said Tariq Zahir, founder of New York-based oil-oriented hedge Tyche Capital Advisor.
"We would not be surprised if the $ 60 mark on WTI is skipped," he said. Another factor affecting energy prices is Philadelphia Energy Solutions' decision to permanently close its oil refinery in Philadelphia following a massive fire last weekend. This has helped fuel gasoline prices and could also positively affect oil prices.
Gasoline in New York rose 4.4 percent to $ 1,925 a gallon. On a weekly basis, gasoline prices rose 6 percent and 45 percent over the previous year.
But Zahir, who is usually a permafar, also warned that oil market watchers are now targeting the G20 meeting later this week and the OPEC meeting from July 1 to 2, to see how crude oil demand in could develop the future. "We will see the next change of direction based on the results of these two events."