Oil gains 2pc on falling US inventory

New York: Oil prices rose more than two percent on Wednesday, bouncing back from multi-month lows, after data showed a bigger-than-expected draw in US crude stockpiles, even as worries about weak oil demand in China persisted.

Brent crude futures were up $1.84, or 2.41 percent, to $78.32 a barrel at 1:35pm EDT. US West Texas Intermediate crude rose $1.96, or 2.68 percent, to $75.16.

US crude stocks fell for a sixth week in a row, dropping by 3.7 million barrels to 429.3m barrels last week, government data showed, more than analysts’ expectations in a Reuters poll for a 700,000-barrel draw.

“The story here really is that demand is stronger than people thought and overall supplies are tighter,” said Phil Flynn, an analyst at Price Futures Group. “Crude supply is below average for this time of year”. Industry data from the American Petroleum Institute on Tuesday had shown an unexpected build in crude and gasoline inventories.

On Monday, Brent slumped to its lowest since early January and WTI touched its lowest since February, as a global stock market rout deepened on concerns of a potential recession in the US after weak jobs data.

Both oil benchmarks broke a three-session declining streak on Tuesday.

“The recovery we have gotten from the large downturn on Monday shows it was a very short-lived temper tantrum and not a market crash,” said Tim Snyder, chief economist at Matador Economics. Lower production at Libya’s 300,000 barrel-per-day (bpd) Sharara oilfield is also adding to concerns of supply shortages.

SOURCE: REUTERS