Oil jumps $5 on shrinking stockpiles

Crude prices soar after the government reports a decline in stockpiles; dollar weakness also supports prices.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Ben Rooney, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Oil prices shot up more than $5 on Wednesday, erasing most of the losses that crude posted earlier in the week and leading some analysts to wonder when oil's dramatic doubling from last year's price levels will end.

The market is in "overreaction mode," said Dan Flynn, a market analyst at Alaron Trading in Chicago. "For every one headline we get to bring the market down, we get two headlines that bring it back up."

Light, sweet crude for July delivery rose $5.07 to settle at $136.38 a barrel on the New York Mercantile Exchange. The contract surged nearly $11 on Friday to set an all-time high of $139.12 before giving up more than $7 earlier this week.

Oil has set three single-day gains of more than $5 in the span of a week. Wednesday's rise was the third-largest on record, trailing record-setting gains on June 5 and June 6. Crude is now trading at more than double last year's levels, when it traded at just $65.97 a barrel.

Bullish inventory report

Crude prices soared as supply concerns mounted. In its weekly inventory report, the U.S. Energy Information Administration said crude supplies fell by 4.6 million barrels last week. Analysts were looking for a drop of 1.4 million barrels, according to a poll by energy research firm Platts.

The decline in crude oil supplies was "wildly bullish," said Flynn. But that sentiment was tempered by a "very bearish" 2.3 million barrel increase in supplies of distillates, which are used to make heating oil and diesel fuel, he said.

The EIA report also showed a 1 million barrel increase in gasoline supplies that was roughly in line with analysts' expectations. Demand for gas fell 1.3% versus the same period last year.

Weak dollar

A softening of the U.S. dollar also contributed to the rise in crude prices Wednesday. The euro bought $1.5566, up from $1.5449 Tuesday.

When the dollar falls, many investors buy oil and other commodities as a hedge against inflation. The greenback's retreat also makes dollar-denominated commodities more appealing to overseas investors.

Geopolitical concerns have also pressured the market recently, Flynn said.

Gas prices hit record

Separately, retail gas prices rose nine-tenths of a cent to a fourth straight record of $4.052, according to AAA. The price of diesel fuel rose seven-tenths of a cent to an all-time high of $4.792 a gallon. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.