Oil holds biggest price gain in two weeks after surprise fall in United States stockpiles

Oil held its biggest advance in two weeks as an unexpected decline in US crude stockpiles eased a global glut.
Oil held its biggest advance in two weeks as an unexpected decline in US crude stockpiles eased a global glut.PHOTO: BLOOMBERG

MELBOURNE (Bloomberg) - Oil held its biggest advance in two weeks as an unexpected decline in U.S. crude stockpiles eased a global glut.

Futures were little changed in New York after climbing 5.7 per cent Wednesday. Inventories fell by 2.1 million barrels through Sept. 11 as output slid a sixth week and refineries increased operating rates for the first time since July, government data showed. Supplies were forecast to expand by two million barrels in a Bloomberg survey.

Oil is down more than 20 percent from this year's closing peak in June amid a global oversupply that Goldman Sachs Group Inc. estimates is even bigger than it first thought. U.S. stockpiles remain about 100 million barrels above the five-year seasonal average.

"Production continues to head in the right direction," Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. "The 2 million barrels shaved off inventories doesn't change much in the big picture but down is better than up." West Texas Intermediate for October delivery was at US$47.11 a barrel on the New York Mercantile Exchange, down four US cents, at 11:56 a.m. Sydney time. The contract gained $2.56, the biggest jump since Aug. 31, to close at US$47.15 on Wednesday. The volume of all futures traded was about 16 percent above the 100-day average. Prices are down 12 per cent this year.

U.S. Output Brent for November settlement was 3 cents lower at $49.72 a barrel on the London-based ICE Futures Europe exchange. It rose US$2 to US$49.75 on Wednesday. The European benchmark crude traded at a premium of US$2.19 to WTI for November.

U.S. crude production dropped by 18,000 barrels a day to 9.1 million a day last week, the Energy Information Administration reported Wednesday. Output has slipped by 493,000 barrels a day since the start of June when the nation pumped at the fastest rate since 1983, according to weekly data from the EIA.

Nationwide stockpiles fell to 455.9 million barrels as refinery utilization climbed by 2.2 percentage points to 93.1, the first gain since the week ended July 31, the EIA reported. Crude inventories at Cushing, Oklahoma, declined by 1.9 million barrels to 54.5 million.