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Oil Jumps 4% as Crude Stocks Fall After Hurricane Zeta Disruptions

Oil prices jumped 4% on Wednesday after data showed U.S. crude stockpiles dropped 10 times more than the build expected by analysts for last week as Hurricane Zeta became the third storm in six weeks to distort market projections.

Crude prices also rose along with stocks on Wall Street after a relief rally sparked by the safe conclusion of the U.S. election, although President Donald Trump alleged fraud in some key races won by Democratic challenger Joe Biden, and threatened legal challenges.

New York-traded West Texas Intermediate, the leading indicator for U.S. crude prices, settled up $1.49, or 4%, at $39.15 per barrel. On Monday, WTI hit a mid-June low of under $33.64 per barrel.

London-traded Brent, the global benchmark for oil, finished the session up $1.52, or 3.8%, at $41.23 per barrel. 

U.S. crude stockpiles fell 8 million barrels last week, the Energy Information Administration, or EIA, said. That number confounded analysts who had predicted a rise of 890,000 barrels on the average. 

But a closer study of the crude inventory drop showed it could be related to a daily drop of 600,000 barrels in crude imports and the decline of another 600,000 per day in crude production estimated by the EIA. 

Both events appeared to be a consequence of Hurricane Zeta.

Zeta made landfall in the Yucatán Peninsula, on Oct. 26, forced widespread shutdown of crude production facilities in the region while preventing dislodging of imported crude carried by ships into the area. 

It was the third major storm in six weeks — after hurricanes Sally on Sept. 16 and Delta on Oct. 9 — that have helped keep crude prices above or near $40 per barrel since last month as oil production facilities in the U.S. Gulf Coast of Mexico were shut in precaution.

The EIA also said that crude oil stored at Cushing, Oklahoma, storage point for contracted barrels of WTI rose by a smaller volume of 936,000 barrels, against expectations for a build of 2.4 million barrels. 

Gasoline inventories, meanwhile, increased by 1.5 million barrels against estimates for a draw of 871,000 barrels.

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Nov 5, 2020