Oil rises on sharp drop in US crude inventories

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A gas pump at a gas station in Seoul on June 27, 2011. REUTERS / Jo Yong-Hak / File Photo

MELBOURNE, Sept. 22 (Reuters) – Oil prices rose about 1% on Wednesday, extending gains overnight, after industry data showed U.S. crude inventories fell more than expected last week following two hurricanes, highlighting tight supply as demand improves.

US West Texas Intermediate (WTI) crude futures were up 75 cents, or 1.1%, to $ 71.24 a barrel at 0131 GMT, adding to a gain of 35 cents from Tuesday.

Brent crude futures rose 68 cents, or 0.9%, to $ 75.04 a barrel, after gaining 44 cents on Tuesday.

After coming under pressure on Monday due to wider market nervousness over a possible default by Chinese property developer China Evergrande Group (3333.HK), the oil market focused on supply issues.

U.S. crude inventories fell 6.1 million barrels for the week ending Sept. 17, market sources said, citing figures from the American Petroleum Institute on Tuesday.

This is a much larger drop than the 2.4 million barrels drop in crude inventories that 10 analysts polled by Reuters on average expected.

The market will monitor data from the US Energy Information Administration on Wednesday to confirm the sharp drops in crude and fuel inventories.

Supply is expected to remain limited after Royal Dutch Shell (RDSa.L), the largest US producer in the Gulf of Mexico, said damage to its offshore transfer facilities will curtail production early next year. Read more

Inventories of gasoline fell by 432,000 barrels and inventories of distillates, which include jet fuel, by 2.7 million barrels, API data showed, the sources said on condition of anonymity.

This comes at a time when the demand for jet fuel is increasing.

“Market sentiment has received additional support from the end of the US ban on foreign travelers,” ANZ commodity analysts said in a note.

Further supporting the market, some producers in the Organization of the Petroleum Exporting Countries and their allies, collectively referred to as OPEC +, are struggling to increase production to target levels, sources told Reuters. Most of the deficit comes from Nigeria, Angola and Kazakhstan. Read more

Reporting by Sonali Paul; edited by Richard Pullin

Our Standards: Thomson Reuters Trust Principles.


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