(Bloomberg) -- Oil closed at the highest level in almost two months on Tuesday after a government report showed U.S. refineries boosted their use of crude.
West Texas Intermediate futures rose for a third day after the Energy Information Administration said fuel plants processed 16 million barrels a day of crude last week, the highest level for this time of year in data going back to 1989. Gasoline inventories fell by 1.47 million barrels.
"This is starting to look like a bull market," said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion. "Every time the market falls back, it’s an opportunity to buy."
Crude has surged 32% since closing at a 12-year low on Feb. 11 on speculation low gasoline prices will boost demand. Russian oil producers met with President Vladimir Putin to pledge support for a plan agreed with Saudi Arabia and other nations to freeze output at January levels. U.S. crude inventories rose by 10.37 million to the highest since 1930, the EIA said.
The build in crude supplies isn’t “going to interrupt an early spring rally,” James Cordier, founder of Optionsellers.com in Tampa, Florida, said of the higher crude supplies. “Gasoline demand is going to be tremendous."
WTI for April delivery gained 26 cents, or 0.8%, to $34.66 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 5.
Brent for May settlement climbed 12 cents to $36.93 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a premium of 63 cents to WTI for May.
U.S. refineries used 88.3% of their capacity last week, up from 87.3% the previous week.
U.S. crude stockpiles increased to about 518 million barrels in the week ended Feb. 26, the EIA said. That’s the highest level in weekly data going back to 1982. In monthly data, inventories were higher in 1930.
Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, increased by 1.19 million barrels last week to 66.3 million barrels, the highest weekly level since data starting in 2004.
"People decided to ignore this week’s numbers," said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. "People are more convinced that the market is generally moving towards a bull market."
Russian crude and condensate output edged lower in February from a record the previous month amid talks with Saudi Arabia and other exporters on freezing production. Russian oil production fell 0.2 percent to 10.885 million barrels a day from January, according to data e-mailed from the Energy Ministry’s CDU-TEK unit.
The freeze should bring predictability to market participants, lower volatility and allow for planning in the long term, Russian Energy Minister Alexander Novak said on Tuesday in Moscow.
Impact of price volatility on companies:
* Anadarko Petroleum Corp. plans to sell $3 billion of assets this year while cutting spending on new wells and other projects by almost 50% as the producer weathers the crude market collapse.
* Nexen Energy, the Canadian unit of China’s Cnooc Ltd., cut 120 jobs as the company struggled with low prices and disrupted operations.
* U.S. oil and gas companies from Marathon Oil Corp. to Weatherford International Plc have announced plans to raise about $9.2 billion in new equity, the most year-to-date since at least 1999, according to data compiled by Bloomberg.