On Wednesday U.S. Crude Futures rallied $1.86, or 5.2%, to reach $37.75 a barrel on the New York Mercantile Exchange with the unexpected news that U.S. crude stockpiles are down. Even though many analysts projected inventory to continue it’s upward trend, U.S. crude-oil supplies fell by 4.9 million barrels in the week ending April 1st. The EIA reported the drop is attributed to declined imports and more importantly the increase in refinery activity; reporting that refineries ran at 91.4% capacity last week compared to 90.4% the week before. The general consensus is that refineries are increasing output to meet the summer demand when drivers are expected to travel more – especially with the price of gasoline as low as it is currently.
It’s important to note that one week doesn’t constitute a trend, but this is a good sign that prices are primed for a rebound. Market watchers will be keeping a close eye on many contributing factors over the next couple weeks to form their opinion on the future of oil prices. The main topic they’ll be tracking is the fact that oil inventories around the world are still near record highs. Iran is still defying fellow producing countries by refusing to decrease output and because of this stance, Saudi Arabia recently changed it’s tune as well saying they won’t cut back production unless Iran is on board as well.
So even though we’ve seen a decline in U.S. inventories this week, analysts and investors say that stockpiles have to start declining steadily on a global level before prices can rise further.