NEW YORK (
) -- Crude oil stockpiles swelled even further last week, the government said Wednesday, but oil supplies at a key location and broader fuel levels saw declines.
In its weekly assessment of inventory levels, the Energy Information Administration said crude stockpiles increased by 2.4 million barrels for the week ending May 21. An average poll of analysts, conducted by Platts, showed most were looking for a less bearish build of 100,000 barrels for the week.
Yet the EIA also said fuel stocks experienced surprising drawdowns. Gasoline inventories dropped by 200,000 barrels, defying expectations calling for an increase of 150,000 barrels. Distillate fuel stockpiles, too, shed 300,000 barrels, even though analysts were looking for those levels to gain another 200,000 barrels.
But even more telling for analysts, crude stockpiles at the much-watched Cushing, Okla., delivery site saw a mild drawdown, falling to 37.6 million barrels from 37.9 million barrels the week before. Chatter among market observers and within recent news stories has centered on the historical supply levels at the site and their effect on the front-month contract.
The results only helped extend the morning rally in futures that followed alongside
improving stocks, which were themselves prompted by improving economic data and global sentiment. Most recently, the July delivery crude contract was trading $2.13 higher at $70.88. July heating oil was improving 4 cents to trade at $1.92 a gallon, while July gasoline futures was adding another 4 cents at $1.96 a gallon.
"Crude is performing better due to the Cushing hub draw," said Hamza Khan, commodities analyst for The Schork Group. "The markets are reacting rationally. Even though we saw a build in stocks, it was mostly in PADD V in the West Coast, and that's less of a concern."
"You gotta keep in mind -- the last time we fell below $70, we stepped back in and pushed prices above $80," he added. "You gotta figure people are saying $70 is our technical bottom and there's nowhere else to go but higher. The fact we're seeing the draw in Cushing is only feeding the bulls their favorite food."
The oil-related sector in equities was trading broadly mixed of late. The NYSE Arca Oil index was slipping 0.1%, though the Philadelphia Oil Service Sector index was advancing 1.3%. Dow components
were improving 0.5% and 0.4%, respectively, while the
U.S. Oil Fund
ETF traded 2% higher.
In the ongoing saga that is the record oil slick in the Gulf of Mexico,
began preparations to administer its
so-called "top kill" procedure, meant to plug a gushing leak caused after a BP operated deepwater rig exploded and sank. BP didn't offer a firm timeline for when it would move forward with the top kill plan, but is running
a live video feed of the effort.
Elsewhere on the Nymex, the July natural gas contract was trading 9 cents higher at $4.21 per million British thermal units. The EIA is scheduled to release its weekly assessment of natural gas storage levels on Thursday morning.
--Written by Sung Moss in New York