The EIA reported today that U.S. crude stockpiles dropped from the highest level in more than eight decades as refineries bolstered operating rates. Specifically, crude inventories decreased 4.94 million barrels last week as refineries processed the most crude in three months as production and imports declined. Notably, refinery utilization is now picking up and production is down, which could signal the end of large builds in crude as refinery utilization grows. Refineries bolstered operating rates by 1% to 91.4% of capacity. Of note, U.S. refiners typically increase utilization in April as they finish maintenance before the summer peak driving season. On the back of today's EIA report, West Texas Intermediate for May delivery increased by over 5%. The key takeaway from this report is that most Analysts surveyed were anticipating a new record build in crude this week. With the surprise large reduction in inventories, this will likely signal to market participants that WTI has likely hit a floor. Further, this report should force the crude bears to rethink their bearish balances for Q2/16. Also contributing to the positive momentum in crude today is hopes for an agreement among major OPEC oil producers to freeze output. Notably, Kuwait's OPEC governor said this week that a meeting of oil-producing countries in Doha on April 17 will deliver an agreement to hold output at January highs despite Iran pouring cold water on the plan.
A Canadian Energy expert