NEW YORK (DTN) -- New York Mercantile Exchange oil futures shook off early losses and ended higher this afternoon after the U.S. Energy Information Administration reported an unexpected distillate stock draw as demand rose for the fuel and domestic crude production fell again.
The oil complex also rallied on fresh speculation that major oil producers could meet in Russia in May in a new attempt to reduce production. However, Russian oil minister Alexander Novak denied there were such plans, with the speculation coming days after the same group of oil producers failed to agree on freezing output at January levels at a meeting Sunday in Doha.
NYMEX May West Texas Intermediate crude oil futures expired $1.55 higher at $42.63 per barrel (bbl), off a near five-month high of $42.91. June WTI contract rallied $1.71 to $44.18 at settlement.
June Brent futures on the IntercontinentalExchange advanced $1.77 to $45.80 bbl at settlement, off a near five-month high of $45.88.
In products trade, NYMEX May ULSD futures spiked 6.90 cents to $1.3322 gallon at settlement, off a 4-1/2-month high of $1.3340. NYMEX May RBOB futures rose 2.69 cents to $1.5068 gallon, near a three-day high of $1.5096.
The main reason for the rally was weekly U.S. supply data. The EIA's data showed U.S. crude stockpiles increased 2.1 million bbl during the week-ended April 15. A survey showed the market expected a 1.7 million bbl build for the week while the American Petroleum Institute late Tuesday showed a 3.1 million bbl crude stock build.
However, crude supplies at the Cushing delivery point in Oklahoma for NYMEX WTI declined 248,000 bbl, and U.S. oil production fell 24,000 bpd to 8.953 million bpd, the sixth straight weekly output decline.
Analysts said continued decline in domestic production remains the main bullish factor after Saudi Arabia on Sunday scuttled a plan that would have frozen output by members of the Organization of Petroleum Exporting Countries and non-OPEC producers at January levels.
On demand side of the ledger, EIA reported implied demand for gasoline fell
110,000 bpd for the week while distillates demand rose 423,000 bpd. Refinery crude inputs, a proxy for crude demand, rose 163,000 bpd for the week.
"Refinery runs were up and Cushing supply down means we have strong demand for crude supporting this market," said analyst Phil Flynn at Price Futures. "There's also renewed hope we could get OPEC to freeze output based on the rumors we are hearing about a possible meeting in Russia in May."
Earlier, oil futures fell across the board after a strike by Kuwaiti oil workers ended following a three-day supply disruption.
George Orwel can be reached at email@example.com
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