Oil prices reach six-week high on larger-than-expected drop in US crude stocks

Oil prices rose on Wednesday after US Energy Information Administration data showed a significant drop in US crude stockpiles. Husky Energy photo.

Oil prices up 2 per cent

Oil prices were up over 1 per cent on Wednesday after data from the US Energy Information Administration showed a larger-than-expected draw in crude stocks and a surprising drop in distillate inventories.

Brent crude futures for September ended the day up 86 cents to $49.70 and US WTI for August was up 72 cents to $47.12.

Both contracts had their highest close on Wednesday since June 6.

According to the EIA, US crude stocks were down by 4.7 million barrels in the week ending July 14. Analysts polled by Reuters had anticipated a drop of 3.2 million barrels.

On Tuesday, the American Petroleum Institute released preliminary data that showed a 1.6 million barrel increase.

Before the release of the EIA data, oil prices were up about 0.6 per cent on increasing demand for gasoline.

“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 told Reuters.

“Gasoline inventories are now nearly 5 per cent lower than this time last year. That is a reflection of good consumer demand,” Lipow said.

Distillate stocks were down 2.1 million barrels and gasoline inventories dropped 4.4 million barrels. Analysts had predicted a 1.2 million barrel increase in distillates and a 0.7 million barrel drop in gasoline stocks.

Following the data release, US gasoline and distillates futures were both up by almost 2 per cent.