Oil rebounds as US crude stockpiles unexpectedly decline

Oil advanced as weekly US government data showed crude inventories unexpectedly shrank in the world's biggest oil consumer.
Oil advanced as weekly US government data showed crude inventories unexpectedly shrank in the world's biggest oil consumer.PHOTO: BLOOMBERG

MELBOURNE (BLOOMBERG) - Oil advanced as weekly US government data showed crude inventories unexpectedly shrank in the world's biggest oil consumer.

Futures rose as much as 1.9 per cent in New York, paring losses after a 1.8 per cent drop on Wednesday (Aug 26). Stockpiles fell by 5.45 million barrels to 450.8 million through Aug 21, according to an Energy Information Administration report, compared with an increase of 1.45 million forecast in a Bloomberg survey. Crude production declined for a third week, the EIA said.

Oil has fluctuated below US$40 (S$56) a barrel this week as concern over slowing demand in China fueled volatility in global financial and commodity markets. Prices are down more than 35 per cent from this year's closing peak in June amid speculation a world supply glut will be prolonged, as leading Opec members sustain output and US inventories remain about 90 million barrels above the five-year seasonal average.

"Once periods of high volatility start, they tend to continue," Mr Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. "We would expect to see stockpile draws at this time of year. The uninterrupted global supply scenario is still the key source of pressure for oil."

West Texas Intermediate for October delivery climbed as much as 75 cents to US$39.35 a barrel on the New York Mercantile Exchange and was at US$39.16 at 10.39am Sydney time. The contract slid 71 cents to US$38.60 on Wednesday. Prices have decreased 27 per cent this year.

Brent for October settlement gained as much as 63 cents, or 1.5 per cent, to US$43.77 a barrel on the London-based ICE Futures Europe exchange. It lost 7 cents to US$43.14 on Wednesday. The European benchmark crude traded at a premium of US$4.63 to WTI.