Investing.com – After a knee-jerk reaction lower, West Texas Intermediate oil quickly recovered and extended gains in North American trade on Thursday, after data showed that oil supplies in the U.S. registered a much larger-than-expected inventory draw.
Crude oil for July delivery on the New York Mercantile Exchange gained 61 cents, or 1.26%, to trade at $48.93 a barrel by 11:10AM ET (15:10GMT) compared to $48.66 ahead of the report.
The U.S. Energy Information Administration said in its weekly report that crude oil inventories fell by 6.428 million barrels in the week ended May 26. Market analysts' had expected a crude-stock draw of 2.517 million barrels, while the American Petroleum Institute late Wednesday reported a supply draw of 8.670 million barrels.
Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, decreased by 0.747 million barrels last week, the EIA said. Total U.S. crude oil inventories stood at 509.9 million barrels as of last week, according to press release, which the EIA considered to be “in the upper half of the average range for this time of year”.
The report also showed that gasoline inventories decreased by 2.858 million barrels, compared to expectations for a draw of 1.091 million barrels, while distillate stockpiles rose by 0.394 million barrels, compared to forecasts for a decline of 0.755 million.
The report came out one day later than usual due to Monday's Memorial Day holiday.
Elsewhere, on the ICE Futures Exchange in London, Brent oil for August delivery traded up 43 cents, or 0.85%, to $51.19 by 11:12AM ET (15:12GMT), compared to $50.95 before the release.
Meanwhile, Brent's premium to the WTI crude contract stood at $2.27 a barrel by 11:15AM ET (16:15GMT), compared to a gap of $2.44 by close of trade on Wednesday.
Oil prices traded more than 1% lower in May as the extension of output curbs by the Organization of the Petroleum Exporting Countries (OPEC) and other producing countries announced last Thursday disappointed investors who had hoped for larger cuts.
At last week's meeting in Vienna, OPEC and some non-OPEC producers, led by Russia, agreed to extend supply cuts of 1.8 million barrels per day until the end of the first quarter of 2018.
While OPEC's move had been widely expected, some oil market investors had hoped producers would agree to longer or deeper cuts to drain a global glut of crude supplies.
The cartel next meets in November.
So far, the production-cut agreement has had little impact on global inventory levels due to rising supply from producers not participating in the accord, such as Libya and Nigeria.
In fact, a Reuters survey released Wednesday showed that OPEC oil output rose in May, the first monthly increase this year as higher supply from two OPEC states exempt from a production-cutting deal, Nigeria and Libya, offset improved compliance with the accord by others.
Meanwhile, a relentless increase in U.S. shale oil output also worked to counteract the 1.8 million barrel per day production cut agreement.
Data from energy services company Baker Hughes showed on Friday that U.S. drillers the previous week had added rigs for the 19th week in a row, the second-longest such streak on record, implying that further gains in domestic production are ahead.
The U.S. rig count rose by 2 to 722, extending an 11-month drilling recovery to the highest level since April 2015.
Apart from supply, it will also be vital to keep an eye on global demand as the U.S. driving season kicks off.