Oil Rises on Large Inventory Draw

By Stephanie Yang and Christopher Alessi Features Dow Jones Newswires

Oil prices edged higher on Wednesday, after U.S. government data showed a larger-than-expected drop in U.S. stockpiles.

Continue Reading Below

Light, sweet crude for February delivery rose 36 cents, or 0.6%, to $57.92 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 34 cents, or 0.5%, to $64.14 a barrel.

On Wednesday, the U.S. Energy Information Administration reported that crude stockpiles fell by 6.5 million barrels in the week ended Dec. 15, exceeding both analyst expectations and estimates from the American Petroleum Institute released Tuesday.

"Investor sentiment was boosted by the large drop in crude stocks and an upturn in demand," said analysts at Capital Economics.

Analysts said the decline was largely due to refiners ramping up operations last week, taking crude out of storage and churning it into oil products. Gasoline stockpiles rose by 1.2 million barrels and distillate stockpiles increased by 800,000 barrels, a development that could weigh on energy prices if it continues.

Meanwhile, oil prices have seen support from the disruption of supply from a major pipeline in the North Sea. The Forties Pipeline System closed down last week because of a hairline crack, stopping the flow of 450,000 barrels of oil a day. The pipeline operator, Ineos, has said the outage could last for another few weeks.

Continue Reading Below

"The Brent price should thus remain well-supported as a result until at least the end of the year," according to analysts at Commerzbank.

The supply concerns come as inventories in the market have drawn closer to a normalized level, following ongoing efforts by the Organization of the Petroleum Exporting Countries and other major producers to limit output.

OPEC and 10 producers outside the cartel, including Russia, first agreed a year ago to hold back crude output by nearly 2% in an effort to rein in a global supply glut that has weighed on prices since late 2014.

In November, the group decided to extend the deal through the end of 2018, with a review period in the middle of the year.

Gasoline futures rose 1.8% to $1.7270 a gallon and diesel futures traded near flat at $1.9407 a gallon.

Write to Stephanie Yang at stephanie.yang@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

Oil prices closed higher on Wednesday, after U.S. government data showed a larger-than-expected drop in U.S. stockpiles.

Light, sweet crude for February delivery rose 53 cents, or 0.9%, to $58.09 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 76 cents, or 1.2%, to $64.56 a barrel.

On Wednesday, the U.S. Energy Information Administration reported that crude stockpiles fell by 6.5 million barrels in the week ended Dec. 15, exceeding both analyst expectations and estimates from the American Petroleum Institute released Tuesday.

"Investor sentiment was boosted by the large drop in crude stocks and an upturn in demand," said analysts at Capital Economics.

Analysts said the decline was largely because of refiners ramping up operations last week, taking crude out of storage and churning it into oil products. Gasoline stockpiles rose by 1.2 million barrels and distillate stockpiles increased by 800,000 barrels, a development that could weigh on energy prices if the trend continues.

Meanwhile, oil prices have seen support from the disruption of supply from a major pipeline in the North Sea. The Forties Pipeline System closed down last week because of a hairline crack, stopping the flow of 450,000 barrels of oil a day. The pipeline operator, Ineos, has said the outage could last for another few weeks.

"The Brent price should thus remain well-supported as a result until at least the end of the year," according to analysts at Commerzbank.

The supply concerns come as inventories in the market have drawn closer to a normalized level, following ongoing efforts by the Organization of the Petroleum Exporting Countries and other major producers to limit output.

OPEC and 10 producers outside the cartel, including Russia, first agreed a year ago to hold back crude output by nearly 2% in an effort to rein in a global supply glut that has weighed on prices since late 2014.

In November, the group decided to extend the deal through the end of 2018, with a review period in the middle of the year.

In a Tuesday note, Goldman Sachs analysts said they expect the global oil market to have rebalanced by the middle of next year. While strong U.S. production should lead to stock builds in the first quarter of 2018, draws in the second quarter will help ease high inventory levels, the bank predicts.

"We view risks to prices skewed to the upside initially given upside risks to our demand forecasts as well as risks of renewed disruptions," Goldman analysts wrote.

Gasoline futures rose 2.3%, to $1.7353 a gallon, and diesel futures advanced 0.2%, at $1.9442 a gallon.

Write to Stephanie Yang at stephanie.yang@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

December 20, 2017 17:23 ET (22:23 GMT)