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Oil futures up 3% on US stockpiles, Saudi target

New York

OIL futures jumped nearly 3 per cent on Wednesday on a decline in US crude inventories and after sources signalled top exporter Saudi Arabia wants to see the crude price closer to US$100 a barrel.

Opec's new price hawk Saudi Arabia would be happy for crude to rise to US$80 or even US$100, three industry sources said, a sign Riyadh will seek no changes to a supply-cutting deal even though the agreement's original target is within sight.

Brent crude futures settled at US$73.48 a barrel, up US$1.90, or 2.7 per cent. US West Texas Intermediate crude futures gained US$1.95, or 2.9 per cent, to settle at US$68.47 a barrel, their highest since late 2014.

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Prices were supported as US oil stockpiles fell across the board last week with petrol and distillates drawing down more than expected on stronger demand, according to data from the US Energy Information Administration.

Crude inventories dropped by 1.1 million barrels as a result of a decline of 1.3 million barrels per day in net crude imports. "This may be one of the most bullish reports in some time, with the across-the-board declines in inventories," said John Kilduff, a partner at Again Capital Management in New York. "Beyond the headlines, petrol demand was very strong, virtually summer-like, and crude oil exports have climbed back towards two million bpd at 1.75 million." Buying in anticipation of the report started late Tuesday, said Brian LaRose, a technical analyst with United-ICAP.

The market also found support in expectation that Opec's production cuts will be sustained. Opec and 10 rival producers have curbed output by a joint 1.8 million bpd since January 2017 and pledged to do so until the end of this year.

Opec's ministerial committee tasked with monitoring the group's supply-cutting deal with non-Opec countries, led by Russia, meets in the Saudi city of Jeddah on Friday. "Despite an oil price of over US$70 per barrel and the fact that the oversupply has been eliminated, a phase-out of the production cuts will not be on the agenda," Commerzbank oil analyst Carsten Fritsch said.

Oil has been supported by the perception among investors that tensions in the Middle East could lead to supply disruptions, including renewed US sanctions against Iran, as well as falling output in crisis-hit Venezuela. REUTERS