Oil rose from its lowest close in more than 12 years as inventors tried to pick a bottom after government inventory data.
Futures rose as much as 6.7 per cent in New York. US supplies climbed 3.98 million barrels last week, the Energy Information Administration said Thursday. The American Petroleum Institute reported a 4.6 million barrel gain Wednesday. Prices started to rebound after European Central Bank president Mario Draghi said that the bank might take more measures in March to bolster the economy.
"Oil is searching for a bottom," said Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC who helps manage $US13.5 billion. "I can't tell you if we've found it, but it seems that a lot of people are testing after the report. The numbers were broadly in line with expectations and there's no increase in the bad news."
Crude is down about 20 per cent this year amid volatility in Chinese markets and speculation the removal of restrictions that capped Iran's crude sales will help to prolong a global glut. The world energy industry is facing "very sharp shocks" as it struggles to deal with a "flood of oil", BP chief Bob Dudley said at the World Economic Forum in Davos, Switzerland.
West Texas Intermediate for March delivery rose $US1.42, or 5 per cent, to $US29.77 a barrel at 1.59pm on the New York Mercantile Exchange. The February contract expired Wednesday at $US26.55, the lowest close since May 2003. Total volume traded was 54 per cent above the 100-day average.
Brent for March settlement climbed $US1.57, or 5.6 per cent, to $US29.45 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a 32-cent discount to WTI.
Energy companies were the eight biggest gainers on the Standard & Poor's 500. The S&P 500 Oil & Gas Exploration and Production Index climbed 5.8 per cent, the biggest gain in a month. CONSOL Energy increased 20 per cent, the biggest gain on the S&P 500.
US crude stockpiles climbed to 486.5 million barrels in the week ended January 15, EIA data show. They reached 490.9 million in April, the highest since 1930, according to weekly and monthly data from the agency. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest US storage hub, rose by 191,000 barrels to a record 64.2 million.
Crude output rose by 8000 barrels a day to 9.24 million. That's down from a four-decade high of 9.61 million reached in June, weekly data show. The gain occurred as US producers cut the number of rigs drilling for oil to 515, the fewest in more than five years, according to data from Baker Hughes.
"Producers are responding to the price signals," said Adam Wise, who helps run a $US7 billion oil and natural gas bond and private equity portfolio as a managing director at John Hancock in Boston. "Companies are announcing huge cuts in capital expenditures and the rig count continues to drop. These are signs that the correction is starting to take place."
The global energy industry slashed more than $US100 billion in spending and 250,000 jobs last year to keep pace with crude prices that have fallen by 75 per cent since June 2014. Explorers and producers are expected to cut spending another 15 per cent this year to $US444 billion, J. David Anderson, an analyst at Barclays, wrote last week in a note to investors. It's the first "double dip" spending drop since 1986 and 1987, according to the note.
Gasoline stockpiles climbed 4.56 million barrels to 245 million. Inventories of distillate fuel, a category including heating oil and diesel, dropped 1.03 million barrels to 164.5 million.
Gasoline for February delivery dropped 4.4 per cent to $US1.0212 a gallon, the lowest close since December 2008. Diesel for February delivery decreased 4.7 per cent to 93.43 cents, the lowest settlement since April 2004.
Morning & Afternoon Newsletter