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Oil up as industry report shows hefty drop in US stockpiles
OIL rose for a fourth day after a report showed a hefty drop in US crude inventories and as the resumption of face-to-face trade discussions between Washington and Beijing provided a glimmer of hope for demand.
Futures in New York gained as much as 0.9 per cent after rallying 2.7 per cent over the previous three days. The American Petroleum Institute reported a 10.96 million barrel decline in stockpiles last week, according to people familiar with the data. That's more than twice the drop forecast in a Bloomberg survey before official figures expected on Wednesday. US Trade Representative Robert Lighthizer will travel to China on Monday for the first high-level, face-to-face talks since May.
US inventories will have fallen for six straight weeks if the API figures are confirmed by Energy Information Administration data. That's tightening the supply backdrop just as simmering tension in the Persian Gulf threatens to disrupt crude flows from the region. Still, demand remains shaky, with the International Monetary Fund cutting its global growth projections on Tuesday and warning that policy "missteps" on trade and Brexit could derail a rebound.
"While crude has continued to crawl up because of the rising Middle East tensions, overall bearishness on account of demand growth is quite heavy and quite pervasive," said Vandana Hari, founder of Vanda Insights in Singapore. The resumption of trade talks is good news, but no one is expecting an imminent breakthrough, she said.
West Texas Intermediate for September delivery rose 21 cents, or 0.4 per cent, to US$56.98 a barrel on the New York Mercantile Exchange as at 7.34 am in London after climbing as much as 50 US cents earlier. It closed up one per cent on Tuesday.
Brent for September settlement advanced 13 cents to US$63.96 a barrel on the ICE Futures Europe Exchange after settling 0.9 per cent higher on Tuesday. The global benchmark crude is trading at a US$6.99 a barrel premium to WTI.
US inventories dropped 4.26 million barrels last week, according to the median estimate in a Bloomberg survey. If the API numbers are confirmed by the EIA, that would be the largest decline since mid-June. However, the API said petrol stockpiles rose by 4.44 million barrels.
Mr Lighthizer and a small team are expected to be in Shanghai through Wednesday. The meeting will involve a broad discussion of the issues outstanding and isn't expected to yield major breakthroughs, a senior Trump administration official said. BLOOMBERG