Oil prices jumped more than 3 percent on
Wednesday after the U.S. government reported a larger-than-expected
weekly drawdown in crude inventories, adding fuel to an existing rally
on fading concerns over Britain's exit from the European Union.
The potential for an oil workers
strike in Norway and a crisis in Venezuela's energy sector also added
support to crude futures.
The U.S. Energy Information
Administration said crude stockpiles fell by 4.1 million barrels for the
week to June 24, the sixth consecutive week of drawdowns.
That was more than the 2.4 million
barrels expected by analysts in a Reuters poll. The American Petroleum
Institute trade group had published a drawdown similar to the EIA's on
Tuesday, boosting crude futures in post-settlement trade.
"The report is bullish with the
large crude oil inventory decrease of over 4 million barrels," said John
Kilduff, partner at New York energy hedge fund Again Capital. "The
stepped-up demand by refiners and a plunge in imports helped create the
decline."
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U.S. crude oil production fell by 55,000 barrels a
day, according to preliminary weekly figures. That follows a decline of
39,000 bpd in the previous week.
Brent crude futures were up $1.75, or 3.6 percent, at $50.33 per barrel at 2:04 p.m. ET (1726 GMT).
U.S. crude had climbed $1.77, or 3.7 percent, to $49.62 a barrel.
But the EIA also said gasoline
stocks had an unseasonably large increase of 1.4 million barrels,
compared with analysts' expectations for a 58,000-barrel gain. On the
East Coast, gasoline stockpiles rose to record levels.
That made some traders bearish on their longer-term view of oil.
"We firmly feel any rally will
stall out near the $50 level, as we have seen unjustified gains in
previous weeks for gasoline based on the build number we have now," said
Tariq Zahir, crude spreads trader and managing partner at Tyche Capital
Advisors in New York.
Standard Chartered said that it expected oil prices to return to $50 per barrel rapidly as the Brexit referendum's impact on demand was limited.
Despite that, some bankers said that the knock-on effects from Britain's EU exit vote could continue for some time.
"Uncertainty and volatility ... are both likely to be persistent for a long time to come," Citi analysts said.
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On the supply side, a looming strike by Norwegian oil workers threatened to cut output from the biggest North Sea producer.
In crisis-struck Venezuela, oil
producers and refiners were struggling to keep output up due to power
outages and equipment shortages, traders said.
Despite the tightening
supply-side, there are concerns that a looming refined products glut,
especially in Asia, might spill back into the crude market as refiners
cut output.
(CNBC)
