Oil traded near $65 a barrel after U.S. crude inventories unexpectedly fell, dropping below their five-year average for the first time since 2014.
Futures in New York lost 0.6 percent after jumping to a six-week high on Wednesday. American crude stockpiles fell last week by the most since January, government data showed, confounding more than 80 percent of analysts in a Bloomberg survey. It added to signs that production cuts by OPEC and Russia are successfully clearing a global glut.
Oil prices are approaching the highs of January, after a wider market rout spurred the worst February decline in half a decade. The Organization of Petroleum Exporting Countries and its allies have concluded they will eradicate the oil surplus by September even as investors continue to weigh those comments against surging U.S. crude production.
“Oil surged after inventories declined unexpectedly,” said Norbert Ruecker, head of commodity research at Julius Baer Group Ltd. in Zurich. “Inventories dropped as refineries ramped up activity earlier,” while “low crude imports and elevated exports additionally reduced available supplies.”
West Texas Intermediate crude for May delivery declined 38 cents to $64.79 on the New York Mercantile Exchange at 10:04 a.m. in London, after climbing to $65.17 on Wednesday, the highest since early February. Total volume traded was about 3 percent above the 100-day average.
Brent for May settlement slipped 48 cents to $68.99 a barrel on the London-based ICE Futures Europe exchange, and traded at a $4.14 premium to WTI.
U.S. crude inventories fell by 2.62 million barrels last week, the Energy Information Administration said Wednesday. Analysts had forecast a gain of 3.25 million barrels, and only two of the 12 surveyed had expected a decline.
America’s gasoline inventories also tumbled for a third week to the lowest level since late January, while distillate stockpiles contracted for a sixth straight week to the least since December. Still, U.S. oil production has continued to surge, with output hitting a fresh record last week.
Whether the decline in American inventories can reassure OPEC is uncertain. The producer group is said to be discussing changes to the way it measures the impact of production cuts. One of the options is looking at the past seven years of inventories in OECD countries, instead of five years. By that measure, in the U.S., stockpiles are still 28 million barrels higher than the target.
See also: U.S. Oil Inventories Are Finally Below Average. Or Are They?
Other oil-market news:
U.S. weekly crude imports from seven OPEC members fell 14 percent to 1.86 million barrels a day last week, the lowest level since the EIA began collecting weekly data in 2010. The decline comes as OPEC saw record compliance with production-cut targets in February as the group continues efforts to drain a global glut. Federal Reserve officials raised the benchmark lending rate a quarter-point and forecast a steeper path of hikes in 2019 and 2020, citing an improving economic outlook. Saudi Arabia is still considering New York, Hong Kong and London for listing Saudi Aramco shares after an initial public offering, Finance Minister Mohammed Al-Jadaan said. Commodities now act as a better hedge against core inflation than at any time in the past, said Goldman Sachs Group Inc. analysts including Michael Hinds.