Oil soared on a surprise US inventory drawdown

• Oil surged on an unexpected US crude inventory drawdown.
• Oil is also helped by a slump in USD amid rising equities, softer yields.

Crude oil/WTI is now trading around 62.90, in  the New York session, soaring by 2% on a surprise crude inventory drawdown and a supportive EIA report coupled with a slump in the USD; so far it made a session high of 63.07.

Crude oil inventories came at -1.616M vs. an estimate of 1.795M; prior: 1.841M. Crushing came at -2.664M vs. -3.642M prior. Distillates at -2.422M vs. estimate -1.460M; prior: -0.459M. Gasoline inventories came higher at 0.261M vs. an estimate of -0.283M; prior: 3.599M. US refinery utilization was -1.7% vs. estimate -0.80%. Overall the EIA datawas in line with the API data released earlier.

The unexpected drop in US crude inventories came on a drop in net imports to record lows and a surge in exports. Another reason that the inventories continued to drop at Cushing is that the market remains in backwardation and therefore it's uneconomical to be storing crude as it makes more sense to liquidate the on-hand inventories.

As par EIA the net crude imports fell last week by 1.6 mbpd to 4.98 mbpd, the lowest since the EIA started recording the data in 2001. On the other hand, exports of US crude jumped to just above 2 mbpd, close to a record 2.1 million hit in October. That helped push net imports to the lowest level on record. Crude inventories typically rise at this time of year, as many refineries cut intake to conduct maintenance.

Oil prices were also supported by a dollar´s slumpfrom an eight-day peak. As a reminder, a weaker dollar makes oil and other dollar-denominated commodities cheaper for holders of other currencies. The correlation between moves in the oil price and the dollar has strengthened inthe recent weeks, as investors increasingly sell other assets to buy the US currency in hopes of a faster pace of Fed rate hikes.

Technically, Oil now has to sustain above the 62.95-63.15 area for a further rally towards the63.55-64.85 zone in the coming days; else sustaining below  the 62.75 zone, it may fall to the 61.00-58.00 area.