Oil gains as U.S. crude stocks fall to lowest in over three years

Oil gains as U.S. crude stocks fall to lowest in over three years
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Ahmed Jadallah(Reuters)
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By Stephanie Kelly

NEW YORK (Reuters) - Oil prices rose for a second day on Wednesday after government data showed U.S. crude inventories fell to the lowest since February 2015, easing worries about oversupply that have weighed on markets in recent weeks.

Brent crude futures rose 15 cents to $73.59 a barrel, a 0.2 percent gain, by 11:07 a.m. EDT (1507 GMT).

U.S. West Texas Intermediate (WTI) crude futures rose 10 cents to $68.62 a barrel, a 0.2 percent gain.

Gains were limited though as data from the Energy Information Administration showed a large drawdown in less-critical West Coast crude stocks, which fell their most since December 2011.

"The market typically discounts large crude oil inventory drawdowns when they are concentrated in PADD 5 or the West Coast," said John Kilduff, a partner at Again Capital Management in New York. "PADD 5 is just not as critical to the overall inventory situation."

Overall, crude inventories fell by 6.1 million barrels in the week to July 20, EIA data showed, their lowest since February 2015. Analysts had expected a decrease of 2.3 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.1 million barrels, EIA said, their lowest since November 2014.

"The decrease puts the focus once again on tightening supplies here in the U.S. and it also puts the focus on the fact that U.S. gasoline demand is going through the roof," said Phil Flynn, analyst at Price Futures Group in Chicago.

Gasoline stocks fell by 2.3 million barrels, EIA data showed, compared with analysts' expectations in a Reuters poll for a 713,000-barrel drop. Meanwhile, U.S. Midwest gasoline stockpiles fell to their lowest seasonally since 2015.

Sentiment on Wednesday was also supported by an International Monetary Fund report about skyrocketing inflation in Venezuela, limiting its ability to boost oil output, said Stephen Innes, a trader at brokerage OANDA.

"Venezuelan oil production has already plummeted to a new 30-year low of 1.5 million barrels a day in June," he said.

Oil prices have come under pressure this month as a trade dispute between the United States and China, as well as other major economic blocs, has raised the possibility of slower economic growth and weaker global energy demand.

But the global economy is still growing and it is not clear how the trade dispute may impact business.

Reports that China will increase infrastructure spending have also helped reduce concerns that U.S.-China trade tensions will dent Chinese demand for oil.

(Reporting by Christopher Johnson and Parissa Hedvat in London, and Aaron Sheldrick in Tokyo; Editing by Susan Thomas)

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