U.S. crude surges nearly 4%, in spite of bullish supply data

WTI crude surged nearly $2 on Thursday, while brent rose sharply to near $49 a barrel

Investing.com -- U.S. crude futures surged by nearly 4% during a choppy day of trading even as stockpiles last week rose by a higher level than expected, underscoring continual weak demand throughout energy markets nationwide.

On the New York Mercantile Exchange, WTI crude for October delivery rose sharply on Thursday morning, amid speculation that weekly supply accelerated at a slower pace than previously expected before falling back upon the release of a weekly government supply report soon after. U.S. crude futures then pared some of the gains in afternoon trading, before rallying just before the close to end the day near session-highs. Following the see-saw day of trading, Texas Long Sweet futures settled at $45.84, up 1.70 or 3.84% on the session. U.S. crude futures are on pace for a fairly flat week, halting a stretch of extreme volatility over the last month.

On the Intercontinental Exchange (ICE), brent crude for October delivery traded between $46.79 and $48.90 a barrel before closing at 48.85, up 1.27 or 2.67% on the day. The spread between the international and U.S. domestic benchmarks of crude stood at $4.01, above Wednesday's level of $3.43 at the end of trading.

On Thursday morning, the Energy Information Administration (EIA) said U.S. crude inventories increased by 2.6 million barrels for the week ending on September 4, above expectations for a 1.0 million build. At 458.0 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total gasoline inventories increased by 0.4 million barrels, while distillate fuel inventories rose by 1.0 million barrels for the week. The report was delayed by one day this week due to the Labor Day holiday on Monday. U.S. crude production continues to dip, as output fell by 83,000 barrels last week to 9.135 million barrels per day.

A week earlier, U.S. crude stockpiles rose by 4.7 million barrels, significantly above expectations for an increase of 700,000. Analysts expect demand to fall considerably over the next several weeks, as tourist travel slows to a halt at the end of the summer driving season. U.S. crude futures are still down roughly 45% since OPEC rattled global energy markets last November with a strategic decision to keep its production ceiling above 30 million barrels per day, flooding markets with a glut of oversupply.

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 95.39, its lowest level in more than a week. Disappointing U.S. import-export data in August reinforced arguments for a delayed interest rate hike by the Federal Reserve.

Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.