Investing.com -- Crude futures surged by 4% on Wednesday as Brexit concerns took a backseat for the time being after U.S. crude inventories fell sharply last week, helping ease long-term concerns of oversupply.
On the New York Mercantile Exchange, WTI crude for August delivery traded between $47.99 and $50.00 a barrel before closing at $49.81, up $1.93 or 4.00% on the session. On the Intercontinental Exchange (ICE), brent crude for September delivery wavered between $49.33 and $51.43 a barrel, before settling at $51.23, up $1.97 or 4.00% on the day. The front month contract for North Brent Sea futures moved back above $50 for the first time since tumbling nearly 5% last Friday in the wake of the shocking results of the historic U.K. referendum.
Oil prices are up by more than 60% from their level in February when the U.S. and international benchmarks of crude each crashed below $30 a barrel to hit 12-year lows.
On Wednesday morning, the U.S. Energy Information Administration (EIA) said in its Weekly Petroleum Status Report that U.S. commercial crude oil inventories decreased by 4.1 million barrels last week for the week ending on June 24. At 526.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Analysts initially expected a decline of 2.365 million barrels, before adjusting expectations following reports of a 3.9 million barrel draw by the American Petroleum Institute on Tuesday evening. At the same time, total motor gasoline inventories increased by 1.4 million barrels as the summer driving season hits full stride, while distillate fuel inventories decreased by 1.8 million barrels on the week.
Meanwhile, U.S. crude production fell sharply by 55,000 barrels per day to 8.622 million bpd. As U.S. shale producers have been forced offline due to persistently low prices, weekly output in the U.S. has moved lower in 22 of the last 23 weeks. By comparison, domestic production peaked at 9.6 million bpd at this time last year, its highest level in four decades.
Despite the recent upswing in prices, crude futures are still down sharply from their level in November, 2014 when OPEC rattled markets with a strategic decision to maintain their production ceiling above 30 million bpd. At its current level, global supply continues to exceed demand by approximately 1 million bpd.
Elsewhere, investors continued to monitor the threat of an oil worker strike in Norway, hours before a comprehensive labor deal expires on Friday at midnight. If a new deal is not reached, approximately 7,500 labor union workers are threatening to strike beginning on Saturday. On Wednesday, Norway state-run oil company Statoil (OL:STL) pledged to keep oil field operations running even if a strike is initiated. In May, the International Energy Agency (IEA) reported that Norway pumped nearly 2 million barrels per day, representing 2.1% of the world's total monthly output.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.50% to an intraday low of 95.62, before rallying to 95.82 in U.S. afternoon trading. Despite reaching three-month highs earlier this week, the index is still down by more than 4% since early-December.
Dollar denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.