US oil prices rose nearly two per cent on Thursday after US Energy Information Administration data showed US crude stocks fell by 1.6 million barrels last week.  Phillips 66 photo.

Oil prices rally on Thursday

Oil prices rose Thursday after the US Energy Information Administration reported US crude stocks fell by 1.6 million barrels in the week ending Feb. 16 and the value of the US dollar declined.

By 1:23 p.m. EST, West Texas Intermediate was up 1.83 per cent, or $1.13, to $62.81/barrel.  Benchmark Brent rose 92 cents to $66.07/barrel and the Canadian Crude Index was up 2.7 per cent to $36.08.

The EIA reported net crude imports dropped by 1.6 million barrels per day (b/d) to a record low of 5.94 million b/d and exports rose to just over 2 million b/d last week.  These higher exports helped push net imports to the lowest level on record, according to the EIA.

Crude stocks at the Cushing, Oklahoma delivery hub declined by 1.7 million barrels last week.

“The reason that the inventories continue to drop at Cushing is because the market remains backwardated and therefore it’s uneconomical to be storing crude,” Andrew Lipow, president of Lipow Oil Associates told Reuters.

When the market is backwardated, prompt crude prices are higher than forward prices which discourages storing oil.

“It makes more sense to liquidate your on-hand inventories,” Lipow added.

On Sunday, the Louisiana Offshore Oil Port (LOOP) completed the first oil loading operation of a very large crude carrier (VLCC) at its deepwater port, according to Reuters.  VLCC supertankers can ship about 2 million barrels of oil.

The decline in crude stocks is surprising because demand normally falls at this time of year as many refineries cut their intake while they undergo regular maintenance.

The US dollar declined from an eight-day peak, also boosted oil prices.  A weaker greenback makes oil and other dollar-denominated commodities cheaper for buyers using other currencies.