Crude futures jumped Wednesday after a government report showed a giant decline in U.S. oil stockpiles.
The U.S. Energy Information Administration said U.S. crude inventories fell by 10.6 million barrels last week, the largest weekly drop in more than a decade. Analysts said a portion of the decline is due to refineries looking to cut costs at the end of the year, but the size of the drop still raised concerns about rising demand.
"A 10-million-barrel draw in crude inventories is massive," said Peter Donovan, vice president and broker at Vantage Trading in New York. "Guys on the floor were definitely taken aback."
Light, sweet crude for February delivery surged following the report to trade as high as $99.25 a barrel on the New York Mercantile Exchange. Futures gave back most of those gains by the end of the session to settle $1.43, or 1.5%, higher at $98.67 a barrel.
Brent crude on the ICE futures exchange rose 72 cents to $107.72 a barrel.
Crude stocks often fall at the end of the year as refiners and other companies cut excess supplies to reduce their tax burden. But the size of the drop topped estimates that had called for, on average, a 2.4-million-barrel decline.
Analysts at BNP Paribas said about half of the reported decline was due to a drop in U.S. imports that forced refineries to draw on stockpiles to keep up with foreign demand.
U.S. crude stockpiles have fallen by more than 45 million barrels from a 2011 peak of 369 million barrels in June. Demand for fuel products globally has prompted domestic refineries to churn out diesel for export to Europe and developing markets, such as Brazil.
Stocks of distillate, which include heating oil and diesel, fell 2.4 million barrels last week, a steeper decline than the 300,000 barrels expected by analysts. Futures for January heating oil settled 5.93 cents higher at $2.9087 a gallon.
Inventory declines in the weekly data were significantly smaller for gasoline, however, falling just 400,000 barrels from the earlier period.
U.S. drivers are still being squeezed by retail gasoline prices that stand at $3.229 a gallon on average. Last week, fuel consumption was down 4.4% from a year ago, according to a report on U.S gasoline demand from MasterCard Advisors.
Front-month January reformulated gasoline blendstock, or RBOB, settled 4.12 cents, or 1.6 percent, higher at $2.6199 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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