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Oil gains second day as US production slides most in 8 months

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Oil advanced a second day after data showed that US production fell the most in eight months.

[HONG KONG] Oil advanced a second day after data showed that US production fell the most in eight months.

Futures rose as much as 2.3 per cent in New York after gaining 0.3 per cent Wednesday. US output slid to the lowest since September 2014 last week, according to government data.

Suncor Energy Inc and Royal Dutch Shell Plc are among companies reducing production because of the blaze that may affect more than 1 million barrels a day of capacity, according to company statements and data published in Alberta's Spring Oil Sands Quarterly.

Oil has rebounded after slumping to the lowest since 2003 earlier this year amid signs the global glut will ease as US output declines.

The Organization of Petroleum Exporting Countries is currently without a proposal to revive limits on production at its June meeting after failing last month to agree on a supply freeze, according to six delegates from the group.

"The trend of declining US production is a real positive," Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. "I expect prices will probably touch the US$48 to US$50 zone. We will have to see significant inroads into crude stockpiles to push through that area. Canada's overall contribution to the global pool is not as strong, but at the margin, the fires are supportive."

West Texas Intermediate for June delivery rose as much as US$1.02 to US$44.80 a barrel on the New York Mercantile Exchange and was at $44.71 at 2:32 pm Hong Kong time. The contract gained 13 US cents to US$43.78 on Wednesday. Total volume traded was about 56 per cent above the 100-day average.

Brent for July settlement gained as much as 85 US cents, or 1.9 per cent, to US$45.47 a barrel on the London-based ICE Futures Europe exchange.

The contract fell 35 US cents to US$44.62 on Wednesday. The global benchmark crude was at a premium of 12 US cents to WTI for July.

US production slid by 113,000 barrels a day to 8.83 million a day, according to a report Wednesday from the Energy Information Administration. That's the biggest weekly drop since August 2015. Nationwide crude inventories increased by 2.8 million barrels to 543.4 million, the most since 1929.

BLOOMBERG