U.S. crude stocks fell sharply last week, driven by a surge in refining and exports to record highs, while gasoline inventories also dropped sharply ahead of the start of the summer driving season, the Energy Information Administration said on Thursday.
The government data boosted oil prices, acting as a salve for the market's ongoing concerns about a global glut.
Crude inventories fell 6.4 million barrels in the week to May 26, far more than analysts' expectations for a decrease of 2.5 million barrels.
U.S. crude stockpiles have been steadily declining for eight straight weeks, suggesting that the long-awaited effect from OPEC efforts to reduce world supply are finally coming to fruition.
“This was a bullish report. It’s what the market needs to get a little more excited about prices. I don't think this is going to be the end of it, I see the draws increasing from here,” Scott Shelton, energy specialist at ICAP in Durham, North Carolina said.
Much of the decline can be attributed to a big jump in refining activity, as the amount of crude processed was at a record high and overall capacity utilization hit a high not seen for this time of year since 2005.
Refinery crude runs rose 229,000 barrels per day to 17.5 million bpd, surpassing its last peak at 17.3 million bpd in the week to April 21, and utilization rates increased 1.5 percentage points to 95 percent of nationwide capacity, data showed.
Crude exports also hit a peak, rising nearly 700,000 bpd to 1.3 million bpd, as imports fell 987,000 bpd, the EIA said.
Despite the hike in refining, gasoline stocks fell 2.9 million barrels, more than double expectations for a 1.1 million-barrel drop.
U.S. exports of petroleum products rose to 4.9 million bpd, and on average, exports are up more than 31 percent year-over-year.
That increase has helped bring down seasonally high gasoline inventories, as refiners are seeing increased demand for exports that has helped offset somewhat weak domestic demand for gasoline so far this year.
U.S. gasoline demand over the past four weeks was 0.7 percent lower year-on-year at 9.6 million bpd.
U.S. crude futures extended gains after the data and was 1.4 percent, or 68 cents, higher at $49 a barrel, as of 11:33 a.m. EDT (1533 GMT). Brent crude futures were up 1.1 percent to $51.31 a barrel.
November's deal between the Organization of the Petroleum Exporting Countries and non-OPEC members like Russia has been slow to take hold, as many nations sold inventory out of storage before truly cutting exports. That has kept prices under pressure, rather than raising them, as OPEC hoped.
U.S. crude production has also continued to increase, rising to 9.34 million bpd, up nearly 500,000 bpd from a year-ago.
"The worry is that you have rising output in the U.S. and that’s going to offset cuts," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Connecticut.
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