Oil prices rose for a fifth day on Wednesday following a larger-than-expected drop in U.S. inventories and after the Federal Reserve cut U.S. interest rates for the first time in more than a decade.
The front-month Brent crude futures contract, which expired Wednesday, rose 45 cents to settle at $65.17 a barrel. Brent posted a monthly decline of 2.1 per cent.
U.S. West Texas Intermediate (WTI) crude futures gained 53 cents to settle at $58.58 a barrel, and inched up 0.2 per cent in July.
U.S. crude stockpiles fell for a seventh straight week, slumping 8.5 million barrels last week, the Energy Information Administration said, far exceeding analysts’ expectations for a decrease of 2.6 million barrels.
At 436.5 million barrels, U.S. crude inventories, not including strategic oil reserves, were at the five year average for this time of year, the EIA said.
The drawdown came even as offshore production restarted as the effects of Hurricane Barry waned, with output rebounding to 12.2 million barrels per day, near recent levels, from 11.3 million bpd a week earlier.
Gasoline stocks fell 1.8 million barrels, while distillate stockpiles dipped by 894,000 barrels.
“These are bullish numbers across the board. The renewed large draw in crude oil is remarkable as U.S. oil production bounced back significantly after (Hurricane Barry),” said Carsten Fritsch, oil analyst at Commerzbank.
In a separate report, the EIA said U.S. crude oil output in May slipped from a monthly record high, falling 26,000 bpd to 12.11 million bpd.
After its two-day policy meeting, the U.S. Fed cut interest rates, citing concerns about the global economy and muted U.S. inflation. The central bank signalled a readiness to lower borrowing costs further if needed.
The Fed said the rate cut should help return inflation to its 2 per cent target but that uncertainties about that outlook remain.
Libya’s Sharara oil field, the country’s largest, shut after a problem on Tuesday with a valve on the pipeline linking it to the Zawiya oil terminal. State-owned National Oil Corp (NOC) declared force majeure on loadings of the crude grade on Wednesday.
OPEC oil output hit an eight-year low in July as a further voluntary cut by top exporter Saudi Arabia deepened losses caused by U.S. sanctions on Iran and outages elsewhere in the group, a Reuters survey found.
Backwardation in Brent, a market structure in which later-dated contracts trade at lower levels than near-term contracts, has to a large extent evaporated, signalling a well-supplied market despite OPEC-led output cuts and U.S. sanctions on oil producers Iran and Venezuela.
Meanwhile, U.S. and Chinese negotiators wrapped up a round of trade talks on Wednesday without visible signs of progress and put off their next meeting until September.
A Reuters monthly poll showed oil prices are expected to be range-bound near current levels this year as slowing economic growth and a protracted trade dispute curb demand.