Oil jumps after third surprise weekly US crude draw

Source : REUTERS
By : Barani Krishnan
Last Updated: Thu, Sep 22, 2016 11:08 hrs

Oil prices rose up as much as 3 percent on Wednesday after a third surprise weekly drop in U.S. crude stockpiles helped assuage fears over a global oil glut.

A weaker dollar after the Federal Reserve's decision to leave U.S. interest rates unchanged and an oil workers' strike in Norway that threatened to cut North Sea crude output further boosted oil.

Brent crude futures settled up 95 cents, or 2 percent, at $46.83 per barrel.

U.S. West Texas Intermediate (WTI) crude futures rose $1.29, or 2.9 percent, to settle at $45.34.

The U.S. Energy Information Administration (EIA) said crude inventories fell 6.2 million barrels last week, versus a 3.4 million-barrel build forecast in a Reuters poll.

Crude stocks in the United States, the world's largest oil consumer, have slumped since 14.5 million barrels were drawn in the week to Sept. 2, the biggest weekly drop since 1999 after a storm disrupted imports to the U.S. Gulf Coast.

While the U.S. drawdowns were bullish, they contrast with surging production from OPEC and other major producers such as Russia. That has caused crude prices to swing lately.

"We are still very well supplied for this time of year," Tariq Zahir, trader in crude oil spreads at Tyche Capital Advisors in New York, said referring to total U.S. crude stocks that stood at record seasonal peaks of nearly 505 million barrels.

Some market participants were puzzled by the U.S. crude draw when imports as a whole rose and refinery runs fell.

U.S. crude imports rose last week by 77,000 barrels per day, but the rate dropped sharply in the U.S. Gulf, falling about 500,000 bpd to 2.9 million bpd, close to the record low of 2.5 million bpd hit in the week to Sept. 2 when the storm disrupted supplies.

Refinery crude runs fell 143,000 bpd as utilization rates fell 0.9 percentage point but were still high at 92 percent of total capacity.

U.S. gasoline futures settled up 2.5 percent at $1.3990 per gallon after data showed stocks of the motor fuel fell 3.2 million barrels nationwide, compared with analysts' expectations for a 567,000-barrel drop.

The national draw in gasoline came after record builds of the fuel in the Gulf Coast and record draws in the East Coast. Those vagaries were the result of a near two-week outage on Colonial Pipeline's key gasoline duct that ran from the refining hub in the south to northeast. The line was to reopen on Wednesday.

"The Colonial Pipeline mess is evident in the gasoline data, which showed supplies stranded in the Gulf and drawn down in the East. We will have to see if the trends normalize next week," said John Kilduff, partner at New York energy hedge fund Again Capital in New York.

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