adminLONDON. — Oil rose yesterday after an unexpected draw-down in US stockpiles and an increase in US petrol prices, but concerns remained about a global surplus, falling Asian demand and whether the Federal Reserve would raise interest rates.
US crude futures strengthened after the American Petroleum Institute reported a 3,1-million-barrel drop in crude inventories last week, versus analyst expectations for an increase.
“It is a big data week,” CMC Markets analyst, Michael Hewson said. “We are likely seeing a bit of position adjustment ahead of key market data.”
Official US crude inventory figures were set to be released yesterday. Front-month US West Texas Intermediate (WTI) crude futures traded 73c higher at $45,32 a barrel at 10.50am GMT, with US petrol prices up for a second straight day after a fall of about 10 percent since the start of the month.
Brent crude for November was up 68c at $48,43 a barrel.
The Brent October contract expired on Tuesday.
Global stock markets rose ahead of a Fed two-day session to decide whether to raise rates for the first time in a decade.
Higher US interest rates would likely attract cash from money traders, lifting the dollar.
That could be bearish for oil markets as it would raise prices for holders of other currencies.
The prospect of falling US oil production as prices skim six-year lows has narrowed the gap between benchmark US and Brent crude futures.
The Brent-WTI spread between the two prompt months shrank on Tuesday to about $1,45 a barrel, the narrowest since January, when WTI briefly cost more than Brent.
The spread was about $2,70 yesterday.
“We believe that this could be the market’s reaction to the decline in US crude production (drilling) . . . further exacerbated as Iranian crude could be entering the market, which puts heavy pressure on the global benchmark (Brent),” said Daniel Ang, an analyst at Singapore-based Phillip Futures.
Iranian crude stored in tankers could quickly enter world markets once sanctions against Tehran are lifted. Oil prices have fallen by almost 60 percent since June 2014 on concerns about oversupply and slowing Asian demand, factors that continue to weigh on prices. — Reuters
Online Reporter