Oil rises as U.S. crude stocks drop by more than expected
Oil futures rose, maintaining some gains from earlier in the day, as a report showing hefty drawdowns in U.S. crude inventories was offset by data pointing to lackluster gasoline demand.
U.S. crude inventories fell 7.6 million barrels last week, its biggest weekly plunge in 10 months, the U.S. Energy Information Administration (EIA) said.
That was much more than the 2.9 million-barrel crude draw forecast in a Reuters poll but was slightly less than the 8.1 million-barrel decline reported by the American Petroleum Institute (API) on Tuesday. <ENERGYUSA>
But at 495.4 million barrels, U.S. crude oil inventories were in the upper half of the average range for this time of year.
U.S. gasoline stocks <USOILG=ECI> fell 1.6 million barrels, compared with analysts' expectations for a 1.1 million-barrel gain, but were also in the upper half of the average range, EIA said.
"U.S. gasoline demand remains lackluster and gasoline stocks are still above the five-year average, which will cap gains in crude and gasoline prices," said Abhishek Kumar, Senior Energy Analyst at Interfax Energy's Global Gas Analytics in London.
Brent crude futures <LCOc1> rose 22 cents, or 0.5 percent, to settle at $47.74 a barrel, while U.S. West Texas Intermediate (WTI) crude <CLc1> gained 45 cents, or 1 percent, to settle at $45.49.
That bigger gain in U.S. crude, pressured the premium of front-month Brent futures over WTI to $2.08 per barrel, the lowest so far this month.
Before the EIA released its storage report, Brent was up 1.9 percent and WTI was up 2.4 percent.
Traders noted suggestions from the Organization of the Petroleum Exporting Countries (OPEC) that the oil market will see a surplus next year also weighed on Wednesday's price gains.
"We are still facing a situation where there is an abundance of oil across the globe and demand is increasing at a pace that only makes a small dent in inventories," said Mark Watkins, Regional Investment Manager with U.S. Bank Wealth Management in Park City, Utah.
"The rebalancing of the supply and demand equilibrium for oil is moving at a snail's pace," Watkins said.
OPEC said its oil production jumped in June and forecast world demand for its crude will decline next year as rivals pump more, pointing to a market surplus in 2018 despite an OPEC-led output cut.
Those output cuts, in place since the start of the year, have lent prices some support, but in recent weeks rising output from Libya and Nigeria - OPEC members exempt from the output reduction deal - has pushed supply higher.
(Additional reporting Alex Lawler and Ahmad Ghaddar in London and Henning Gloystein in Singapore; Editing by Dale Hudson and Marguerita Choy)