Oil prices rose Thursday, with West Texas Intermediate crude trading at a three-week high and on track for a third consecutive session of gains.
Bigger-than-expected drawdowns in U.S. petroleum-product stockpiles and gains in refinery activity raised expectations of higher demand for crude.
Natural-gas prices, meanwhile, showed little reaction, continuing their earlier losses, after a weekly decline in domestic inventories of the fuel was in line with market expectations.
On the New York Mercantile Exchange, May West Texas Intermediate crude CLK7, +1.68% added 52 cents, or 1.1%, to $50.03 a barrel. Prices, which rallied by 2.3% Wednesday, were poised to settle at another three-week high.
May Brent crude LCOK7, +1.01% on London’s ICE Futures exchange rose 28 cents, or 0.5%, to $52.70, with the contract set to expire at Friday’s settlement.
Both WTI and Brent trade roughly 7% lower year to date, according to FactSet data.
Data from the U.S. Energy Information Administration released Wednesday revealed an increase in domestic crude supplies to another record, but also showed larger-than-expected declines in gasoline and distillate supplies and refiners processing oil at a higher rate.
“Underpinning the U.S. inventory numbers was a turn in the industrial data, indicating the seasonal ramp in refiner capacity is accelerating,” said Chris Kettenmann, chief energy strategist at Macro Risk Advisors. “This is supportive of total crude-product drawdowns and, at the margin, should help alleviate the inventory overhang on crude oil and related energy securities.”
On Nymex Thursday, April gasoline RBJ7, +1.06% added 1.1 cents, or 0.7%, to $1.683 a gallon, while April heating oil HOJ7, +1.06% rose 1.2 cents, or 0.8%, to $1.554 a gallon. The April contracts expire at the end of Friday’s session.
The strong uptrend in U.S. crude production, meanwhile, is keeping investors from placing bullish bets. Data showed that despite the recent pullback in prices, domestic output rose for a fifth-straight week.
JBC Energy said that given prices have been bobbing in a narrow range, the growth in U.S. oil-drilling activity seen so far this year may lose steam over the next few months. But that doesn’t mean less production because new rigs are much-more efficient as they can drill more oil in less time.
“Rising U.S. oil output remains the key downside risk to oil prices over the next year,” said Vivek Dhar, a commodities strategist at Commonwealth Bank of Australia.
This comes as the market continues to await whether recent production cuts led by the Organization of the Petroleum Exporting Countries will be extended beyond the initial six-month term when the cartel meets to review the pact at the end of May, and to what degree they are cutting into bloated global supplies.
Elsewhere in the energy market, prices for natural gas held onto earlier losses after the EIA Thursday reported that U.S. natural-gas supplies fell by 43 billion cubic feet for the week ended March 24. That matched the decline expected by analysts polled by S&P Global Platts.