WTI surges to session high after bullish EIA report, weaker dollar

West Texas Intermediate crude rose to session high during early U.S. trading on Wednesday after the Energy Information Administration reported that U.S. motor gasoline and distillate fuel inventories dropped much more than analysts expected, indicating robust demand for oil products in the worlds top consumer. Crude inventories rose less than anticipated. A broadly weaker dollar allowed dollar-denominated commodities to regain positions.

On the New York Mercantile Exchange, WTI crude for delivery in December traded at $94.55 per barrel at 16:02 GMT, up 1.26% on the day. Prices surged to session high of $94.77 minutes after the release of the data, while days low stood at $93.36 a barrel. The U.S. benchmark lost 0.8% on Tuesday, a sixth consecutive daily retreat, but trimmed its weekly decline to less than 0.1% following Wednesdays rebound.

Meanwhile on the ICE, Brent futures for settlement in December rose by 0.38% to $105.74 per barrel by 16:03 GMT. Prices held in days range between $106.40 and $105.36 per barrel. The European benchmark fell by 0.5% on Tuesday and trimmed its weekly decline to little over 0.1% on Wednesday.

Oil prices were supported by a broadly weaker dollar and on signs of improving demand in the worlds top consumer as crude inventories rose less than expected, while oil product supplies fell much more steeply than anticipated.

The Energy Information Administration said in its weekly report that U.S. crude oil inventories rose for a seventh consecutive time in the week ended November 1 and added 1.6 million barrels, outperforming the median estimate of analysts surveyed by Bloomberg for a surge to 2.1 million barrels. Refineries utilization rate fell by 0.5% to 86.8% from a week earlier. Total U.S. crude oil imports fell by 235 000 barrels per day to 7.2 million from a week earlier.

The report also showed that gasoline production fell last week, while distillate fuel output rose, averaging 8.4 million and 4.9 million barrels per day, respectively. Total motor gasoline inventories fell by 3.8 million barrels to the lowest in a year, sharply outperforming analysts expectations for a moderate drop by 400 000 barrels, but were still in the upper half of the average range for this time of the year. Distillate fuel stockpiles decreased by 4.9 million barrels last week, beating predictions for a 1.5 million drop, and remained at the lower limit of the average range.

Total products supplied over the last four weeks averaged 19.4 million bpd, up 3% from the comparable period last year.

The industry-funded American Petroleum Institute also reported on Tuesday a much steeper than expected fall in U.S. motor gasoline and distillate inventories, indicating robust demand in the world’s top consumer. According to the report, U.S. crude supplies rose by 871 000 barrels to 382.0 million in the week ended November 1, a seventh consecutive weekly gain. Stockpiles at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts, surged by 999 000 barrels, a third weekly advance in a row.

However, the report also showed that motor gasoline inventories fell by 4.3 million barrels, while distillate fuel supplies slid by 2.73 million, both well above analysts’ expectations. The upbeat data revived hopes for an improvement in U.S. demand prospects, which drew investors back to the market.

Oil prices also drew support by a weaker dollar, which allowed dollar-priced commodities to regain positions. The dollar was largely pressured by upbeat data from Europe and Canada, while comments from Fed officials calling for patience with tapering offset a recent string of upbeat U.S. data which raised speculations for earlier-than-expected stimulus deceleration.

Earlier in the day, the Euro zone’s Final Services PMI surprised positively and rose to 51.6, exceeding expectations for expanding at the same pace as in September at 50.9. Year-on-year, the single currency blocs retail sales rose in September by 0.3% after falling by a revised 0.2% in the preceding month. Meanwhile, Germanys factory orders expanded at a faster-than-expected pace in September, while Great Britain’s manufacturing production rose by 1.2% in September after declining by 1.2% in August. Upbeat manufacturing data from Canada also weighed on the U.S. dollar.

The euro also drew support after ECB officials hinted that the central bank probably wont cut the single currency blocs refinancing rate at its policy meeting tomorrow.

The U.S. dollar index, which measures the greenbacks performance against a basket of six major peers, traded at 80.52 at 16:01 GMT, down 0.34% on the day. The December contract held in range between session low of 80.46 and days high at 80.80 and extended its weekly decline to over 0.3%.