By September 21, 2016 Read More →

Oil prices up after third surprise weekly U.S. crude draw

Oil prices

Oil prices rose after surprising news of a sizeable drop in US crude inventories. QEP Resources photo.

Oil prices up two per cent

By Barani Krishnan

NEW YORK, Sept 21 (Reuters) – Oil prices rose 2 per cent on Wednesday after a third surprise weekly drop in U.S. crude stockpiles helped assuage fears over a global oil glut.

Oil was also supported by a strike in Norway that threatened to cut North Sea crude output and a weaker dollar ahead of a Federal Reserve policy announcement at 2:00 p.m. EDT (1800 GMT), where the central bank was expected to keep U.S. interest rates unchanged.

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 also contrast with surging production from OPEC and other major producers such as Russia, causing 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 record seasonal peaks of nearly 505 million barrels.

Brent crude futures were up $1, or 2.2 percent, at $46.88 per barrel by 1:37 p.m. EDT (1737 GMT).

U.S. West Texas Intermediate (WTI) crude futures rose $1.20, or 2.7 percent, to $45.24.

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 b/d to 2.9 million b/d, close to the record low of 2.5 million b/d hit in the week to Sept. 2 when the storm disrupted supplies.

Refinery crude runs fell 143,000 b/d as utilization rates fell 0.9 percentage point but were still high at 92 per cent of total capacity.

U.S. gasoline futures rose 2 per cent after data showed stocks of the motor fuel fell 3.2 million barrels nationwide, compared with analysts’ expectations for a 567,000-barrel drop.

That contrasted with record builds in the Gulf Coast and record draws in the East Coast, amid a near two-week outage on a key gasoline line that runs 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.

(Additional reporting by Amanda Cooper in LONDON and Henning Gloystein and Mark Tay in SINGAPORE; Editing by Marguerita Choy and Will Dunham)

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