Reports crude oil rally dead premature as inventories drop

Bloomberg

Hedge funds betting that oil’s rally was over missed an 11 percent gain after U.S. crude inventories unexpectedly fell.
Short positions in West Texas Intermediate crude jumped 35 percent in the week ended April 5, according to the U.S. Commodity Futures Trading Commission. The next day, the government reported a 4.94 million-barrel drop in U.S. oil inventories, the first decline in eight weeks.
“Everybody thought there was going to be a build in the inventories” and the actual data proved otherwise, said Carl Larry, director of oil and gas issues in Houston for consultant Frost & Sullivan, Inc. “The market’s bouncing back a little.”
WTI oil for May delivery dropped 6.2 percent to $35.89 a barrel on the New York Mercantile Exchange during the report week, before rebounding to $39.72 on April 8. Prices were at $39.90 a barrel at on Monday in Hong Kong.
Expected Increase
The drop in supply data last week ran counter to analysts’ forecasts for an increase. Production declined to the lowest level since November 2014 while refiners used the most crude in three months, Energy Information Administration data showed on Wednesday.
U.S. output is sliding after $100 billion in spending cuts last year by explorers amid the worst price meltdown in a generation.
The number of active oil rigs in the U.S. declined to the lowest level since 2009, Baker Hughes Inc. data show.
Most members of the Organization of Petroleum Exporting Countries and other major producers including Russia plan to meet on April 17 in Doha, Qatar, to consider an oil-production freeze amid a global glut. Saudi Arabia, the world’s largest crude exporter, has said it will not cap production unless other producers do the same.