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Oil rises as US crude stocks drop by more than expected
[NEW YORK] Oil futures rose, maintaining some gains from earlier in the day, as a report showing hefty drawdowns in US crude inventories was offset by data pointing to lackluster petrol demand.
US crude inventories fell 7.6 million barrels last week, its biggest weekly plunge in 10 months, the US Energy Information Administration (EIA) said.
That was much more than the 2.9 million-barrel crude draw forecast in a Reuters poll but was slightly less than the 8.1 million-barrel decline reported by the American Petroleum Institute (API) on Tuesday.
But at 495.4 million barrels, US crude oil inventories were in the upper half of the average range for this time of year.
US petrol stocks fell 1.6 million barrels, compared with analysts' expectations for a 1.1 million-barrel gain, but were also in the upper half of the average range, EIA said. "US petrol demand remains lackluster and petrol stocks are still above the five-year average, which will cap gains in crude and gasoline prices," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.
Brent crude futures rose 22 cents, or 0.5 per cent, to settle at US$47.74 a barrel, while US West Texas Intermediate (WTI) crude gained 45 cents, or 1 per cent, to settle at US$45.49.
That bigger gain in US crude, pressured the premium of front-month Brent futures over WTI to US$2.08 per barrel, the lowest so far this month.
Before the EIA released its storage report, Brent was up 1.9 per cent and WTI was up 2.4 per cent.
Traders noted suggestions from the Organization of the Petroleum Exporting Countries (Opec) that the oil market will see a surplus next year also weighed on Wednesday's price gains.
"We are still facing a situation where there is an abundance of oil across the globe and demand is increasing at a pace that only makes a small dent in inventories," said Mark Watkins, Regional Investment Manager with US Bank Wealth Management in Park City, Utah. "The rebalancing of the supply and demand equilibrium for oil is moving at a snail's pace," Mr Watkins said.
Opec said its oil production jumped in June and forecast world demand for its crude will decline next year as rivals pump more, pointing to a market surplus in 2018 despite an Opec-led output cut.
Those output cuts, in place since the start of the year, have lent prices some support, but in recent weeks rising output from Libya and Nigeria - Opec members exempt from the output reduction deal - has pushed supply higher.