Oil jumps on first U.S. drawdown since March; Brent up 4 percent

Wed May 11, 2016 3:03pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil jumped on Wednesday, with Brent up more than 4 percent for a second day in a row, after the U.S. government unexpectedly said crude inventories fell the first time since March, adding to concerns over supply outages in Canada and Nigeria.

The U.S. Energy Information Administration (EIA) said crude inventories fell 3.4 million barrels last week, compared with analysts' expectations for an increase of 714,000 barrels and the American Petroleum Institute's (API) build of 3.5 million barrels in preliminary data issued on Tuesday. [EIA/S] [API/S]

The EIA report "has been quickly viewed as bullish, with the crude draw just about exactly opposite to what API had," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

Oil markets extended gains after the data. Brent crude futures LCOc1 settled up $2.08, or 4.6 percent, at $47.60 per barrel. In the previous session it gained 4.3 percent.

The EIA, in a separate report on Wednesday, said it expected Brent to trade at $76 a barrel in the next year on continued increase in demand.

U.S. crude's West Texas Intermediate futures CLc1 rose $1.57, or 3.5 percent, to settle at $46.23.

The rally in crude crossed over to refined oil products, with gasoline settling up 6 percent and ultra-low-sulfur diesel, or heating oil, 4 percent. The refining margin, or "crack," for gasoline 1RBc1-CLc1 had its biggest daily gain in three months, rising more than 14 percent to above $20 a barrel.

Crude prices had risen earlier after Shell announced a Nigerian pipeline closure while Canadian energy companies tried to restart closed facilities that had halted more than 1 million barrels per day (bpd) in supply after a huge wildfire in Alberta's oil sands region.   Continued...

An oil pump jack can be seen in Cisco, Texas, August 23, 2015. REUTERS/Mike Stone