Oil jumps after third surprise weekly US crude draw

[NEW YORK] Oil prices rose as much as 3 per cent on Wednesday after a third surprise weekly drop in US crude stockpiles boosted the demand outlook in the world's largest oil consumer.

The US dollar weakened after the Federal Reserve left US interest rates unchanged, which also buoyed prices for US dollar-denominated crude.

Another supportive factor was an oil workers' strike in Norway, which threatened to cut North Sea crude output.

Prices jumped after the US Energy Information Administration (EIA) stunned the market when it said crude inventories fell 6.2 million barrels last week. Forecasters in a Reuters poll had expected a 3.4 million-barrel build.

US crude stocks have slumped since 14.5 million barrels were drawn in the week to Sept 2, when a storm disrupted imports to the US Gulf Coast. It was the biggest weekly drop since 1999.

The US drawdowns have contrasted with higher output by the Organization of the Petroleum Exporting Countries, even as Opec was expected to agree with other crude exporters to freeze production in talks scheduled in Algeria next week.

Non-Opec members have also been raising production, with Russia achieving record highs of above 11 million barrels per day.

Brent crude futures settled up 95 cents, or 2 per cent, at US$46.83 per barrel.

US West Texas Intermediate (WTI) crude futures rose US$1.29, or 2.9 per cent, to settle at US$45.34.

Some traders, however, said US crude stockpiles were still high and prices could come under pressure again. "We are still very well supplied for this time of year," said Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in New York, referring to total US crude stocks that stood at record seasonal peaks of nearly 505 million barrels.

Some market participants were puzzled by last week's draw in US crude when imports as a whole rose and refinery runs fell.

US crude imports rose last week by 77,000 barrels per day. Refinery crude runs fell 143,000 bpd as utilisation rates fell 0.9 percentage point.

US gasoline futures settled up 2.5 per cent at US$1.3990 per gallon after data showed stocks of the motor fuel fell 3.2 million barrels nationwide, compared with analysts' expectations for a 567,000-barrel drop.

The draw in gasoline came after an outage on Colonial Pipeline's key gasoline duct that ran from the refining hub in the south to northeast.

"The Colonial Pipeline mess is evident in the gasoline data," said John Kilduff, partner at New York energy hedge fund Again Capital in New York.

"We will have to see if the trends normalise next week."

REUTERS