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Oil prices nearly three per cent on large inventory draw

Oil prices

Oil prices hit a one-week high on Monday on talks of an oil output freeze and have since fallen due to uncertainty over the deal. QEP Resources photo.

Oil prices rise as US crude inventories drop by 12.1 million barrels last week

By Scott DiSavino

NEW YORK, Sept 7 (Reuters) РU.S. crude prices soared nearly three per cent on Wednesday in post settlement trading after U.S. inventory data showed what might be the largest weekly stock draw in over three decades.

Nationwide crude inventories plunged by 12.1 million barrels in the week to Sept 2, according to data released late Wednesday from the American Petroleum Institute. If data released on Thursday from the U.S. government confirms the draw, it will be the largest one-week decline since April 1985.

U.S. crude jumped after the data release, rising by as much as 1.6 percent, or 71 cents, over the next 20 minutes. It settled earlier up 67 cents at $45.50 a barrel, a third consecutive session of gains.

Brent futures rose 72 cents to settle at $47.98 a barrel.

The draw in crude inventory may boost markets going forward, especially as demand slips in the fall marked by heavy refinery maintenance season and the end of summer driving.

“I think it will start to ease fears of oversupply in the market,” said Gene McGillian, a senior analyst at Tradition Energy in Stamford, Connecticut. “There’s apprehension of crude restocking as we exit the gasoline season and we exit strong demand. That’s one of the reasons why the market fell below $45.”

Trading this week has remained fairly choppy as the market focused on the possibility that the world’s top oil producers could strike a deal on an output freeze later this month.

Oil hit a one-week high on Monday after Russia and Saudi Arabia agreed to cooperate on stabilising the oil market. Prices have since fallen due to uncertainty over a deal, particularly after a meeting in Doha in April among the world’s largest producers to discuss output ended in failure.

The Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia are expected to discuss an output freeze at informal talks in Algeria on Sept. 26-28.

“I think we’re going to be headline driven for a while. Generally, I think we’ll see lower prices going forward. The upcoming meeting isn’t going to do very much. If OPEC freezes at these levels, these are record levels,” said Tariq Zahir, analyst at Tyche Capital Advisors.

Iran has said it would cooperate on a freeze only if fellow exporters recognised its right to boost market share to levels reached before the imposition of nuclear-related sanctions, which have now been lifted.

The U.S. Energy Information Administration is set to release its inventory report on Thursday at 11 a.m.

(Additional reporting by Amanda Cooper in London, Osamu Tsukimori in Tokyo, Catherine Ngai in New York; Editing by Marguerita Choy and Alistair Bell)

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