Oil prices rose Wednesday on the back of supply restrictions in North America and falling U.S. inventories.
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Brent crude oil, the global benchmark was up 1.02%, at $63.21 a barrel in London midmorning trading. On the New York Mercantile Exchange, West Texas Intermediate futures were trading near 2 1/2 -year highs, up 1.83% at $57.87 a barrel.
"The market's focus on the OPEC meeting [on Nov. 30] has been temporarily disrupted, with prices supported by the continued outage of a pipeline from Canada to the U.S.," said Ole Hansen, head of commodity strategy at SaxoBank. "That combined with the big draw report from the (American Petroleum Institute) data has resulted in WTI being the outperformer for a change," he added.
TransCanada, the company which operates the Keystone pipeline told customers Tuesday that it will reduce oil deliveries via the supply line by 85% through the end of November, according to ING in a note. "The longer the disruption goes on for, the more supportive it will be for WTI, with reduced Canadian flows to the U.S.," the note added.
TransCanada wasn't immediately available for comment.
That news followed data from the API', late Tuesday, that showed a 6.4 million-barrel decrease in crude supplies for the week, an 869,000-barrel rise in gasoline stocks and a 1.7 million-barrel decline in distillate inventories, according to a market participant. That drop came partly thanks to lower imports and was "surprisingly pronounced," Commerzbank analysts said in a note.
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The release of those data came in advance of U.S. Energy Information Administration oil inventories, due out Wednesday at 10:30 a.m. EST. Market watchers surveyed by The Wall Street Journal expect on average to see U.S. oil inventories decline by 1.5 million barrels in the week ended Nov. 17.
A drop in inventories would follow a surprise increase a week earlier, which pushed oil futures down from their highest levels since mid-2015. Another increase in production, though, "could put paid to the highflying oil prices," Commerzbank said.
That data is due ahead of next week's Organization of the Petroleum Exporting Countries meeting. The cartel's members and non-OPEC producers, including Russia, are expected to extend a deal to reduce production and bring down the global supply.
Among refined products, Nymex reformulated gasoline blendstock--the benchmark gasoline contract--was up 0.1% at $1.77 a gallon. ICE gasoil, a benchmark for diesel, changed hands at $566 a metric ton, up 1.34% from the previous settlement.
Neanda Salvaterra contributed to this article.
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Oil prices rose to the highest level in more than two years Wednesday, boosted by a drop in U.S. crude stockpiles.
Light, sweet crude for January delivery gained 96 cents, or 1.7%, to $57.79 a barrel on the New York Mercantile Exchange, on track for the highest close since June 2015. Brent, the global benchmark, advanced 50 cents, or 0.8%, to $63.07 a barrel.
On Wednesday, the U.S. Energy Information Administration reported that crude inventories fell by 1.9 million barrels in the week ended Nov. 17, exceeding analyst expectations for a drop of 1.5 million barrels. The data helped ease concerns over increasing supply from the U.S. as global supply has declined.
Prices were also helped by disruptions in TransCanada Corp.'s Keystone pipeline, which leaked about 5,000 barrels of oil last week. Analysts said this contributed to the decline of crude stockpiles at Cushing, Okla., an important hub for oil storage and pricing.
The U.S. data temporarily drew attention away from a coming meeting between the Organization of the Petroleum Exporting Countries and other global producers, set for Nov. 30. Oil prices have risen in recent weeks on expectations that the group will extend a deal to curb production past March 2018.
"We continue to see support from the optimism that you'll see an extension agreed to next week," said Gene McGillian, research manager at Tradition Energy. Along with healthy demand, "those two factors still seem to be outweighing that U.S. and North American production is going to be increasing," he said.
U.S. production also reached another record weekly high last week, according to the EIA.
"We're going to need to see this kind of [reduced inventories] data every week to start another leg on this rally," Mr. McGillian said.
Oil prices pared gains briefly following the EIA report, as the crude draw fell short of estimates from the American Petroleum Institute for a decline of 6.4 million barrels.
"The market's rather thin today," said Donald Morton, senior vice president of Herbert J. Sims & Co., who oversees an energy trading desk. "Overall I think these numbers are more bearish than bullish."
Analysts have warned that with bullish speculative bets on oil near record highs, the market could be underwhelmed by an announcement from OPEC and vulnerable to a selloff next week. While most market participants are betting on an extension, more uncertainty surrounds the length of any such deal.
"The issue is, is it 3 or is it 6 or is it 9 [months]?" said Mr. Morton.
The EIA reported that gasoline stockpiles were unchanged last week, and distillate stockpiles rose by 300,000 barrels.
Gasoline futures fell 0.2% to $1.7695 a gallon and diesel futures were trading near flat at $1.9361 a gallon.
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(END) Dow Jones Newswires
November 22, 2017 12:53 ET (17:53 GMT)