Oil prices jumped more than 1 percent on Wednesday after a U.S. report showed a bigger weekly draw than forecast in crude and gasoline stocks along with a surprise drop in distillate inventories.
The Energy Information Administration (EIA) said U.S. crude stocks fell 4.7 million barrels during the week ended July 14., exceeding estimates for a 3.2 million draw in a Reuters poll. [EIA/S]
Brent futures for September delivery were up 60 cents, or 1.2 percent, at $49.44 a barrel by 11:58 a.m. EDT (1558 GMT). U.S. West Texas Intermediate crude for August was up 54 cents, or 1.2 percent, at $46.94 on its second to last day as the front month.
"The report was more good news for the oil industry as inventories declined across the board for crude and products by over 10 million barrels," Andrew Lipow, president of Lipow Oil Associates in Houston said.
EIA said distillate stocks decreased 2.1 million barrels and gasoline stocks declined 4.4 million barrels. Analysts polled by Reuters had forecast a 1.2 million barrel build in distillates and a 0.7 million barrel draw in gasoline.
U.S. distillates were up 2.1 percent and gasoline futures rose 1.5 percent, briefly boosting the products crack spread, a measure of refinery margins, to its highest since November 2016.
The drawdown occurred even as EIA said U.S. production climbed to 9.43 million barrels per day (bpd), its highest since July 2015. Analysts said rising U.S. production has made it harder for OPEC and other producing nations to support prices with their own output cuts.
"U.S. crude output has maintained its upward trajectory despite oil prices remaining below $50 a barrel," said Abhishek Kumar, Senior Energy Analyst at Interfax Energy`s Global Gas Analytics in London. He said this "poses serious questions on the effectiveness of the output cut deal agreed upon by OPEC and some non-OPEC countries."
Supplies from the Organization of the Petroleum Exporting Countries (OPEC) remain high. Rising output from member states Nigeria and Libya have cast doubt on efforts to reduce the crude glut.
The head of Libya`s National Oil Corp said the country aims to produce 1.25 million bpd by the end of the year and 1.5 million bpd by the end of 2018.
Nigeria and Libya are exempt from a deal between OPEC and other producers, including Russia, to cut production by 1.8 million bpd.
A Russian energy source said the country is ready to keep working with OPEC to rebalance oil markets.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)