By May 11, 2016 Read More →

Oil prices up after first US crude draw in 6 weeks

Oil prices up 3 per cent

oil prices

Oil prices went up as crude inventories fell after the Fort McMurray wildfire forced the closure of a number of Alberta oil sands facilities.  Canadian National Defence photo.

By Barani Krishnan

NEW YORK, May 11 (Reuters) – Oil jumped on Wednesday, with Brent up more than 4 percent for a second day in a row, after the U.S. government unexpectedly said crude inventories fell the first time since March, adding to concerns over supply outages in Canada and Nigeria.

The U.S. Energy Information Administration (EIA) said crude inventories fell 3.4 million barrels last week, compared with analysts’ expectations for an increase of 714,000 barrels and the American Petroleum Institute’s (API) build of 3.5 million barrels in preliminary data issued on Tuesday.

The EIA report “has been quickly viewed as bullish, with the crude draw just about exactly opposite to what API had,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

Oil markets extended gains after the data. Brent crude futures settled up $2.08, or 4.6 percent, at $47.60 per barrel. In the previous session it gained 4.3 percent.

The EIA, in a separate report on Wednesday, said it expected Brent to trade at $76 a barrel in the next year on continued increase in demand.

U.S. crude’s West Texas Intermediate futures rose $1.57, or 3.5 percent, to settle at $46.23.

The rally in crude crossed over to refined oil products, with gasoline settling up 6 percent and ultra-low-sulfur diesel, or heating oil, 4 percent. The refining margin, or “crack,” for gasoline had its biggest daily gain in three months, rising more than 14 percent to above $20 a barrel.

Crude prices had risen earlier after Shell announced a Nigerian pipeline closure while Canadian energy companies tried to restart closed facilities that had halted more than 1 million barrels per day (bpd) in supply after a huge wildfire in Alberta’s oil sands region.

“We were not totally surprised with the draw after the shut-in in Canadian production,” said Tariq Zahir, trader and managing partner at Tyche Capital Advisors, New York. “But while the fires have taken tar sands production offline, we believe this will not be a prolonged event.”

In Nigeria, a refinery official said crude flows were halted to the Kaduna and Warri refineries after a pipeline attack. Nigeria’s state petroleum company says the Kaduna refinery produces 1.5 million liters (12,579 liquid barrels) of fuel per day, while the one in Warri had a capacity for 125,000 bpd.

On Tuesday, Royal Dutch Shell’s Nigerian unit said it had declared force majeure on Bonny Light exports following the closure of the Nembe Creek Trunk line for repairs after a leak.

(Additional reporting by Simon Falush in London and Henning Gloystein in Singapore; Editing by Meredith Mazzilli and Leslie Adler)

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