Oil halts 2-day rally after US supply erases post-Brexit slump

[SYDNEY] Oil halted a two-day rally fuelled by a drop in US inventories that pushed prices to the highest since the UK's vote to leave the European Union.

Futures declined as much as 1.2 per cent in New York after advancing 7.7 per cent over the previous two days. Crude stockpiles dropped 4.05 million barrels last week, the sixth straight decline to the lowest since March, the Energy Information Administration said Wednesday.

Crude has climbed more than 80 per cent from the lowest level in 12 years in February as global supply disruptions and falling US output reduce a surplus. Even as the world waits to see how the June 23 Brexit referendum plays out, oil demand is expected to continue growing as US vacationers take to the road. Futures dropped 7.5 per cent in the two days following the vote, the biggest decline since February.

West Texas Intermediate fell as much as 61 US cents to US$49.27 a barrel on the New York Mercantile Exchange and traded at US$49.51 at 9:17 am Sydney time.

WTI climbed US$2.03 to settle at US$49.88 on Wednesday, the highest since June 23. Total volume traded as 45 per cent below the 100-day average.

Brent for August settlement rose US$2.03, or 4.2 per cent, to US$50.61 a barrel on the London-based ICE Futures Europe exchange on Wednesday. The global benchmark crude closed at a 73-cent premium to WTI.

BLOOMBERG