Oil up more than 4% as US stockpiles fall, hurricane hits output

[NEW YORK] Oil prices jumped more than 4 per cent on Wednesday, following a drawdown in US crude and petrol inventories and as Hurricane Sally forced a swath of US offshore production to shut.

Brent crude settled at US$42.22 a barrel, up US$1.69, or 4.2 per cent. US crude finished US$1.88, or 4.9 per cent at US$40.16 a barrel.

US crude stocks fell 4.4 million barrels last week to 496 million barrels, their lowest since April, the US Energy Information Administration said, compared with analysts'expectations in a Reuters poll for a 1.3 million-barrel rise, US petrol stocks fell 400,000 barrels, the EIA said, more than double the draw forecast, while refining utilisation rates ticked up 4 percentage points.

"Today's strong gains were largely attributable to bullish crude guidance out of the EIA release," said Jim Ritterbusch of Ritterbusch and Associates.

"The bulk of the (crude) stock decline was driven by an unexpectedly large upswing in US refinery activity led by the Gulf Coast," he said.

Sally, which made landfall on the US Gulf Coast as a Category 2 hurricane, also boosted oil prices as more than a quarter of offshore output shut due to the storm.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Roughly 500,000 barrels per day (bpd) of offshore crude oil production was taken offline in the US Gulf of Mexico, according to the US Interior Department, roughly a third of the shut-ins caused by Hurricane Laura, which landed farther west in August.

Oil collapsed to historic lows as the coronavirus crisis hit demand. A record supply cut by OPEC and its allies, a grouping known as Opec+, and an easing of lockdowns have helped Brent recover from a 21-year low below US$16 in April.

Prices have sunk in September, pressured by rising coronavirus cases and concerns about demand.

The Organization of the Petroleum Exporting Countries and International Energy Agency both cut their demand outlooks this week.

A panel of Opec+ oil ministers meets to review the supply pact on Thursday and is unlikely to recommend further output curbs despite the price drop, sources told Reuters.

REUTERS