By Alison Sider
Oil prices climbed Wednesday after data showed that refiners processed a record amount of crude and that supplies drained from the main storage hub in Cushing, Okla.
The market shrugged off data showing that stockpiles of crude oil and gasoline swelled last week and U.S. oil production rose, and focused on indications that Russia and Saudi Arabia are complying with promised production cuts.
U.S. crude futures rose $1.43, or 2.81%, to $52.25 a barrel on the New York Mercantile Exchange -- their largest daily gain since December 1. Brent, the global benchmark, rose $1.46, or 2.72%, to $55.10 a barrel on ICE Futures Europe.
U.S. refiners churned 17.1 million barrels of crude into fuel a day last week, according to the U.S. Energy Information Administration -- the highest weekly figure in data going back to 1982.
And stocks at the Cushing storage hub, which have been on the rise in recent weeks, fell by 579,000 barrels.
"That takes the pressure off any talk of storage at Cushing filling up," said Bob Yawger, director of the futures division at Mizuho Securities USA.
But the amount of crude in storage nationwide increased by 4.1 million barrels during the week -- a build that was well above the 700,000 barrel increase traders and analysts surveyed by The Wall Street Journal had expected. The EIA data also showed big increases in stockpiles of gasoline and diesel during the week.
And U.S. production jumped to more than 8.9 million barrels a day during the week -- its highest level since April.
Some analysts said crude's move higher is a sign that prices are unlikely to drop much below $50 to $51. Others expect that the positive sentiment won't last and that oil prices will give way to pressure from the rising dollar and rising production.
"I'm surprised we've gotten this much momentum," said Tariq Zahir, managing member of Tyche Capital Advisors. "I think this rally is going to be relatively short lived."
The swelling stockpiles were largely driven by an increase in oil imports, which rose to their highest level since 2012 as shipments of crude that were delayed at the end of last year for tax purposes are starting to appear. That could be one reason the market didn't react to the bearish number.
"Given that today's report has been influenced by a number of tax and data revision issues, we would not make too much of the increases in stocks of oil and gasoline," analysts at Capital Economics wrote in a research note.
That prices rose despite data showing swelling stockpiles and rising production is a sign that market participants are more focused on reports that Russia is complying with an agreement to cut output and Saudi Arabia is trimming sales to China and other Asian countries, said Gene McGillian, research manager at Tradition Energy.
"The market is for direction. It's kind of ignoring some of the bearish fundamentals like the inventory report," he said.
Gasoline futures rose 4.62 cents, or 2.99%, to $1.5929 a gallon. Diesel futures rose 4.1 cents, or 2.54%, to $1.6524 a gallon.
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(END) Dow Jones Newswires
January 11, 2017 15:26 ET (20:26 GMT)
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