Commodities: Oil spikes 5% on inventory drawdown, Keystone outage

Oil futures rose by over 5% on Friday, as long trades gained traction once again on the back of an unexpected US crude inventories dip and the shutdown of the Keystone pipeline stateside.

On Wednesday, US Department of Energy’s data arm – Energy Information Administration – said the country’s crude inventories fell 4.9m barrels in the week to 1 April, compared with analysts' expectations for an increase of 3.1-3.3m barrels.

Crude stocks at the US oil delivery hub of Cushing, Oklahoma, rose 357,000 barrels, the EIA added. Concurrently, crude imports fell by 446,000 barrels per day, owing to weather issues in the Houston Ship Channel last week.

Data failed to fire up traders’ enthusiasm on Thursday, but did so as the weekend approached in tandem with news from Genscape that the shutdown of the Keystone crude pipeline that delivers oil to Cushing had caused a drop of more than 480,000 barrels at the Oklahoma delivery point for US crude futures in the five days to Tuesday.

At 1819 BST, the Brent front month futures contract was up 5.81% or $2.29 to $41.72 per barrel, while WTI futures rose 5.77% or $2.15 cents to $39.41 per barrel.

Jasper Lawler, market analyst at CMC Markets, said, “A surprise draw in weekly US oil inventories has a produced a short-squeeze in oil prices which looked at risk of another downturn as expectations have dropped for any meaningful outcome from the producers meeting in Doha [on 17 April].

“There appears to be a lack of conviction to sell ahead of next week’s producer meeting in case somehow Saudi Arabia and Russia can pull an output freeze out of the hat.”

Away from oil markets, precious metals continued upwards as the dollar weakened following dovish minutes from the US Federal Reserve’s latest monetary policy committee meeting. The COMEX gold June futures contract rose 0.44% or $5.40 to $1242.90 an ounce, while spot gold was up 0.17% or $2.13 to $1,242.58 an ounce.

COMEX silver rose 1.37% or 21 cents to $15.37 an ounce, while spot platinum also jumped 0.85% or $8.18 to $965.88 an ounce.

Base metal three-month futures saw largely lacklustre trading on the London Metal Exchange. At 1635 BST, primary aluminium (+0.3%), zinc (+0.9%), lead (+0.2%) and copper (+0.3%) contracts were marginally up.

Liz Grant, senior account executive at Sucden Financial, said, "LME prices remained "soft" but there was a broad if tentative recovery from the lows seen on Wednesday. Business was generally quiet and turnover on outright three-month trading was approximately half the volume of the previous session.”

Finally, agricultural commodity futures saw a positive start to the US session. CBOT corn (+0.21%), ICE cotton (+1.97%), CME live cattle (+1.53%), ICE cocoa (+0.42%) and CBOT wheat (+0.98%).