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Oil up over 2%; US crude at 15-month high on big drawdown

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Oil prices jumped more than 2 per cent on Wednesday, with US crude settling at its highest in 15 months after the government reported a surprisingly large drop in inventories for the sixth week out of seven.

[NEW YORK] Oil prices jumped more than 2 per cent on Wednesday, with US crude settling at its highest in 15 months after the government reported a surprisingly large drop in inventories for the sixth week out of seven.

The US Energy Information Administration (EIA) said crude stocks fell 5.2 million barrels in the week ended Oct 14, versus forecasts for a 2.7 million barrel build.

Crude stocks generally rise at this time of year as refineries go into maintenance. Refinery utilisation is down to 85 per cent from nearly 94 per cent in early September.

The EIA said US crude imports slid by 912,000 barrels per day last week to 6.47 million bpd, the lowest since Nov 2015, crimping inventories.

"This lowest import pace in some 16 months is surprising given the fact that Opec production has recently attained a record level that would imply easy availability," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

US West Texas Intermediate (WTI) crude's front-month contract, November, closed up US$1.31, or 2.6 per cent, at US$51.60 a barrel for its highest settlement since July 14. Its session peak of US$51.93 was the highest in 15 months.

With expiry due on Thursday, the November contract saw lighter trades than December WTI, which hit a June high of US$52.22. The December contract will be front-month from Friday.

London-traded Brent crude settled up 99 US cents, or 1.9 per cent, at US$52.67.

Some market participants were not impressed by the crude inventory drop, citing instead the large gasoline build of 2.5 million barrels for last week versus forecasts for a 1.3 million-barrel drop.

"While the headline number was bullish, we wouldn't call it extremely bullish," said Tariq Zahir, crude trader at Tyche Capital Advisors in New York.

Oil prices have rallied 15 per cent in the three weeks after the Organization of the Petroleum Exporting Countries proposed to enforce from November its first output cut since 2008.

Khalid al-Falih, energy minister of Saudi Arabia, which dominates Opec, told the Oil & Money conference in London "fundamentals are improving and the market is clearly balancing" after prices fell below US$30 from 2014 highs above US$100.

But Rex Tillerson, chief executive of Exxon Mobil, the world's largest listed oil firm, later told the same conference he expected US shale oil output, responsible for much of the glut, to rebound at current prices.

In industry news, Enbridge, Canada's largest pipeline company, said it was shedding 5 per cent of its workforce, the second layoff of that size since oil prices crashed in 2014.

REUTERS