Oil prices gain nearly 2% after drop in US crude inventories

[NEW YORK] Oil prices rose nearly 2 per cent on Wednesday after a larger-than-expected decline in US crude stockpiles helped ease worries about weakening oil demand caused by the trade war between Washington and Beijing.

Brent crude futures settled 98 cents, or 1.7 per cent, higher at US$60.49 a barrel. West Texas Intermediate crude ended at US$55.78 a barrel, rising 85 cents, or 1.6 per cent.

US crude oil inventories fell last week by 10 million barrels, compared with analysts' expectations for a decrease of 2.1 million barrels, as imports slowed, the Energy Information Administration said.

"There's a lot of big numbers here, but it's all on the import number, which is pretty impressive," said Bob Yawger, director of energy futures at Mizuho in New York.

Net US crude imports fell by 1.51 million barrels per day to 2.9 million bpd, while imports in the Gulf Coast region dropped to their lowest on record at 1.2 million bpd. Over the past four weeks, crude oil imports averaged about 7 million bpd, 12.3 per cent less than the same four-week period last year.

US petrol stocks fell by 2.1 million barrels, compared with analysts' expectations in a Reuters poll for a 388,000-barrel drop.

"It was an incredibly bullish report, one of the more bullish we've had in a while, with draws across the board and of course the massive crude oil drop, which was generated by another drop in imports," said John Kilduff, a partner at Again Capital in New York. That draw down was likely due to a drop in Saudi exports to the US, Mr Kilduff said.

Brexit jitters boosted the US dollar, which generally moves inversely with oil prices, which limited oil gains, Kilduff said.

The dollar rallied as Prime Minister Boris Johnson moved to suspend Britain's parliament for more than a month before Brexit, enraging opponents and raising the stakes in the country's most serious political crisis in decades.

Concerns about the impact of the US-China tariffs war on demand also kept oil prices from rising more.

US President Donald Trump said on Monday that he believed China was sincere about wanting to reach a trade deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through "calm" negotiations.

On Tuesday, however, concerns resurfaced after China's foreign ministry said it had not heard of any recent telephone call between the United States and China on trade, and that it hoped Washington could create conditions for talks.

Crude prices have fallen about a fifth from 2019 highs hit in April, partly because of worries that the trade war is hurting the global economy and could dent oil demand.

Morgan Stanley on Wednesday lowered its price outlook for the rest of the year for Brent to around US$60 per barrel from US$65 and for US crude to US$55 per barrel from US$58 as it downgraded its demand growth forecast for this year and next.

REUTERS