Oil prices push closer to US$50, US crude hits 7-month high

 Crude oil drips from a valve at an oil well.
Crude oil drips from a valve at an oil well.PHOTO: REUTERS

SINGAPORE (REUTERS) - Oil futures pushed closer to US$50 a barrel on Wednesday (May 25), with US crude hitting its highest in over seven months after industry data suggested a larger-than-expected drawdown in US crude inventories last week.

Oil markets were also supported by an overnight surge in US equities and strong US home sales that could point to the Federal Reserve raising interest rates as early as June.

US crude futures had climbed 62 cents to US$49.24 a barrel by 0249 GMT, after ending the previous session up 54 cents. The benchmark earlier on Wednesday touched its highest since mid-October at US$49.35.

Brent futures rose 55 cents to US$49.16 a barrel, having closed up 26 cents to snap a four-day slide.

US crude stocks dropped by 5.1 million barrels to 536.8 million last week, data from industry group the American Petroleum Institute showed on Tuesday. That was double expectations of analysts polled by Reuters.

Some of the drawdown was due to falling imports due to wildfires in Canada, which lost about 1.5 million barrels per day in production, said Ben Le Brun, market analyst at Sydney online brokerage OptionsXpress. Although some crude producers restarted operations on Tuesday in Canada's energy heartland.

The stocks draw also reflected a strengthening US economy.

"A strong US economy is good for oil consumption and demand," Mr Le Brun said.

Gasoline stocks climbed by 3.6 million barrels, while inventories of distillate fuels, including diesel and heating oil, fell by 2.9 million barrels, the API data showed.

Investors are awaiting confirmation of the big draw when the US Energy Information Administration (EIA) issues official inventory figures on Wednesday.

"Technically the market is gearing up for WTI to go above US$50 a barrel and it's intriguing on where it goes from there," said Le Brun. "I think the cap is not too far above that level - the world is still awash with oil even if it's off the peaks."

Oil prices shrugged off the impact from a strong US dollar which hovered close to a 10-week high against the euro in Asian trade on Wednesday.

A strong dollar typically makes greenback-denominated oil more expensive for holders of other currencies.

Iraq is pumping about 4.5 million bpd now and is aiming to boost that to 5.5 million to 6 million bpd by 2020, the head of Iraq's State Oil Marketing Organisation (SOMO) said.