Crude Oil Ends Sharply Higher As U.S. Stockpiles Decline

(RTTNews) - U.S. crude oil surged to end at a near two-week high Wednesday, after an official report from the Energy Information Administration showed crude stockpiles in the U.S. plunged much more than expected for a seventh straight week of decline. Investors also weighed some better than expected manufacturing activity from the New York region, even as the World Bank raised its projections for the world economy.

Earlier today, a report from the Energy Information Administration showed U.S. crude oil inventories to have dropped 7.7 million barrels for the week ended January 10, while analysts expected a decline of 1.6 million barrels. Gasoline stockpile surged 6.2 million barrels last week, while distillate stockpiles dropped by 1.0 million barrels. Analysts anticipated gasoline stockpiles to rise 1.7 million barrels with distillate inventories expected to increase 1.3 million barrels.

Some upbeat economic data from the U.S. also spurred oil prices with business activity for New York manufacturers expanding at a faster pace in January, with the index of regional activity rising much more than anticipated. Meanwhile, a Labor Department report showed producer prices in the U.S. rose in line with economists' estimates in December, with higher prices for energy and tobacco products offsetting a drop in food prices.

The World Bank on Wednesday raised its growth projections for the global economy indicating the easing of fiscal consolidation measures in high-income countries has boosted growth prospects. In its Global Economic Prospects report, the World Bank now expects the world economy to grow 3.2 percent this year, compared to the 3 percent expansion forecast last June. In 2015, the global gross domestic product is expected to grow 3.4 percent, slightly faster than 3.3 percent forecast earlier. The bank projects 3.5 percent expansion in 2016.

Light Sweet Crude Oil futures for February delivery, the most actively traded contract, jumped $1.58 or 1.7 percent to close at $94.17 a barrel on the New York Mercantile Exchange Wednesday.

Crude prices for February delivery scaled a high of $94.64 a barrel intraday and a low of $92.43.

Oil prices ended higher yesterday, in anticipation of decline in U.S. stockpiles, while largely ignoring oversupply concerns with the Iran deal and the expected return of Libyan oil production and export to normal.

The dollar index, which tracks the U.S. unit against six major currencies, traded at 81.03 on Wednesday, up from its previous close of 80.67 late Tuesday in North American trade. The dollar scaled a high of 81.13 intraday and a low of 80.65.

The euro traded lower against the dollar at $1.3603 on Wednesday, as compared to its previous close of $1.3679 late Tuesday in North America. The euro scaled a high of $1.3681 intraday and a low of $1.3582.

In economic news, The New York Fed's general business conditions index jumped to 12.5 in January from 2.2 in December, with a positive reading indicating an increase in regional manufacturing activity. Economists expected the index at 3.5. The index rose to its highest level since reaching 15.9 in May 2012.

U.S. Producer price index rose 0.4 percent in December after edging down 0.1 percent in November. The increase was in line with estimates. The increase was partly due to a rebound in energy prices, which surged 1.6 percent in December after falling 0.4 percent in November and tumbling 1.5 percent in October.

Despite experiencing a deceleration, the German economy expanded for the fourth consecutive year, even as recession in some European countries together with slow global growth dampened the largest euro area nation's economic growth in 2013. Germany's gross domestic product grew 0.4 percent in 2013, slower than the 0.7 percent rise in 2012 and the 3.3 percent increase in 2011, data from the Federal Statistical Office showed Wednesday. The full-year estimate was below the 0.5 percent forecast by economists.

The World Bank has forecast the euro area to grow 1.1 percent this year, ending two years of recession. The U.S. economy is projected to grow 2.8 percent this year, compared to last year's 1.8 percent expansion. Thereafter, growth is seen firming to 2.9 and 3 percent in 2015 and 2016, respectively. The outlook was mostly unchanged from June.

China's GDP is projected to stay flat in 2014 at 7.7 percent, slowing to 7.5 percent for the next two years. The growth predictions are weaker than the 8 percent forecast for 2014 and 2015 each, in June. India's growth is projected to rise to 6.2 percent in financial year 2014-15, down from June's forecast of 6.5 percent for fiscal 2014-15. India's GDP is seen increasing to 6.6 percent in 2015-16 and to 7.1 percent in fiscal 2016-17, according to the latest forecasts.