Wednesday, June 8, 2016

Oil holds gains as US crude inventories fall by 3.2M barrels


U.S. crude jumped to the highest level in more than 10 months on Wednesday, rising for the third consecutive session, buoyed by ongoing supply disruptions in Nigeria and strong Chinese oil demand data. 

Crude futures held gains after U.S. government data showed U.S. crude stockpiles fell last week, while output rose for the first time in three months.

U.S. commercial crude inventories fell by 3.2 million barrels to a total of 532.5 in the week through June 3, according the Energy Information Administration.

Industry data had also shown a larger-than-expected drop in U.S. crude inventories on Tuesday, indicating an easing of the supply glut, and a weak dollar, which hit a five-week trough against a basket of currencies on Wednesday, also boosted prices.

Gasoline inventories increased by 1 million barrels in the previous week, while distillate fuel stocks were up 1.8 million barrels, EIA reported. 

U.S. crude production ticked up 100,000 barrels per day to 8,745,000 bpd from the previous week, reversing a 15-week trend of declining output.

"The market sentiment is positive; the trend and the momentum points to further gains," said Carsten Fritsch, commodities analyst at Commerzbank.

U.S. crude futures climbed 84 cents to $51.20 a barrel by 10:36 a.m. ET (1436 GMT), having hit the highest level since July earlier in the session.

Global benchmark Brent crude futures rose by 96 cents at $52.40 a barrel, after striking a high going back to Oct. 12.

Supply disruptions caused by a string of attacks by the Niger Delta Avengers militant group in Nigeria have brought the oil exporter's production to the lowest in 20 years.

The group said on Wednesday it had attacked another oil well owned by U.S. oil group Chevron, adding to assaults on oil infrastructure owned by Shell and ENI.

Oil Minister Emmanuel Ibe Kachikwu said output had dropped to between 1.5-1.6 million barrels per day (bpd), down from 2.2 million bpd at the start of the year. 

At the same time, Chinese trade data showed on Wednesday that its May crude oil imports made the biggest year-on-year jump in more than six years, adding to hopes that the economy of the world's second-largest oil user may be stabilizing. 

"Overall, China's economic activity is not slowing down as much as expected, which is a support to the market," said Kaname Gokon at brokerage Okato Shoji. 

The dollar fell to the lowest level in five weeks against a basket of currencies, hurt by waning expectations that the Federal Reserve will raise interest rates anytime soon.

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