Oil prices jumped almost 2 percent to a six-week high on Wednesday after a U.S. report showed a bigger weekly draw than forecast in crude and gasoline stocks along with a surprise drop in distillate inventories.
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The Energy Information Administration (EIA) said U.S. crude stocks fell 4.7 million barrels during the week ended July 14. <ENERGYUSA>, exceeding estimates for a 3.2 million draw in a Reuters poll.
Brent <LCOc1> futures for September delivery settled up 86 cents, or 1.8 percent, at $49.70, while U.S. West Texas Intermediate crude <CLc1> for August settled up 72 cents, or 1.6 percent, at $47.12 on its second to last day as the front month.
That is the highest close for both contracts since June 6.
"The report was more good news for the oil industry as inventories declined across the board for crude and products by over 10 million barrels," Andrew Lipow, president of Lipow Oil Associates in Houston, said.
EIA said distillate stocks decreased 2.1 million barrels and gasoline stocks declined 4.4 million barrels. Analysts polled by Reuters had forecast a 1.2 million barrel build in distillates and a 0.7 million barrel draw in gasoline.
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U.S. distillates <HOc1> and gasoline <RBc1> futures both gained more than 2 percent, briefly boosting the products crack spread <CL321-1=R>, a measure of refinery margins, to its highest since November 2016.
The drawdown occurred even as EIA said U.S. production climbed to 9.43 million barrels per day (bpd), its highest since July 2015. Analysts said rising U.S. production has made it harder for OPEC and other producing nations to support prices with their own output cuts.
"The continued rise in U.S. crude oil production to a 2-year high ... increases pressure on OPEC to come up with some counteracting measures. Otherwise, the rebalancing of the oil market will remain painfully slow," said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany.
Supplies from the Organization of the Petroleum Exporting Countries (OPEC) remain high. Rising output from member states Nigeria and Libya have cast doubt on efforts to reduce the crude glut.
The head of Libya's National Oil Corp said the country aims to produce 1.25 million bpd by the end of the year and 1.5 million bpd by the end of 2018.
Nigeria and Libya are exempt from a deal between OPEC and other producers, including Russia, to cut production by 1.8 million bpd.
A Russian energy source said the country is ready to keep working with OPEC to rebalance oil markets.
(Additional reporting by Ahmad Ghaddar in London and Henning Gloystein in Singapore; Editing by David Gregorio and Cynthia Osterman)