Oil Soars 5 pct on OPEC Chatter, U.S. Demand Spike
Oil futures surged 5 percent on Wednesday, after Russia said co-operation with major oil producers was discussed and U.S. data showed a surprise spike in demand for products such as heating oil last week, when a massive blizzard hit the country.
Russia's energy ministry said possible coordination between Russia and the Organization of the Petroleum Exporting Countries (OPEC) was discussed at a meeting with Russian oil companies on Wednesday. Top non-OPEC producer Russia has been unwilling to cut oil output, as it battles for market share with OPEC king-pin Saudi Arabia.
Hints of a possible deal between OPEC members and rival producers to tackle one of the biggest global supply gluts in decades, had already helped oil rally 4 percent on Tuesday.
Brent crude rose $1.61 to $33.40 a barrel, a 5 percent gain, by 12:20 p.m. EST (1720 GMT), after dropping to a session low of $30.83.
U.S. crude was $1.30 higher at $32.74 per barrel, a 4 percent gain, having hit a low of $30.14.
Heating oil futures on Wednesday rose more than 6 percent, boosted in part by further forecasts for cold weather later this week.
Data from the U.S. Energy Information Administration showed inventories of distillates, including as heating oil, fell more than 4 million barrels, trumping expectations for a rise of nearly 2 million.
"The draw in distillate stocks is bullish, but we know there was cold weather in the United States in the last week, so I would say the reason behind the draw has something to do with the cold winter weather and, as such, the impact should be short-lived," Tamas Varga of PVM Oil Associates said.
The data also showed U.S. crude oil stocks hit their highest on record in the week to Jan. 22, due largely to increases on the U.S. Gulf Coast, a major oil hub.
Partly fuelling the rally was relief that the build in inventories shown by the EIA fell short of an 11.5 million-barrel build reported by the American Petroleum Institute.
"Overall, the numbers are bearish but not nearly to the extent of the API data. So I think there's a little bit of short covering based on that right now," Energy Management Institute analyst Dominick Chirichella said.
