SINGAPORE – Oil futures pushed closer to $50 a barrel on Wednesday, with U.S. crude hitting its highest in over seven months after industry data suggested a larger-than-expected drawdown in U.S. crude inventories last week.
Oil markets were also supported by an overnight surge in U.S. equities and strong home sales that could point to the Federal Reserve raising interest rates as early as June.
U.S. crude futures had climbed 56 cents to $49.18 a barrel by 0446 GMT, after ending the previous session up 54 cents. The benchmark earlier on Wednesday touched its highest since mid-October at $49.35.
Brent futures rose 47 cents to $49.08 a barrel, having closed up 26 cents to snap a four-day slide in the previous session.
U.S. crude stocks dropped by 5.1 million barrels to 536.8 million last week, data from industry group the American Petroleum Institute showed on Tuesday. That was double expectations of analysts polled by Reuters.
Some of the drawdown was caused by falling imports due to wildfires in Canada, which lost about 1.5 million barrels per day in production, said Ben Le Brun, market analyst at Sydney online brokerage OptionsXpress. Although some crude producers restarted operations on Tuesday in Canada’s energy heartland.
“A strong U.S. economy is good for oil consumption and demand,” Le Brun said.
Gasoline stocks climbed by 3.6 million barrels, while inventories of distillate fuels, including diesel and heating oil, fell by 2.9 million barrels, the API data showed.
Investors are awaiting confirmation of the big draw when the U.S. Energy Information Administration (EIA) issues official inventory figures on Wednesday.
“Technically, the market is gearing up for WTI to go above $50 a barrel and it is intriguing on where it goes from there,” said Le Brun.
“I think the cap is not too far above that level – the world is still awash with oil even if it is off the peaks.”
His views were echoed by Masanobu Hamada, general manager of the crude oil trading and shipping department at JX Nippon Oil & Energy Corp, who said the current price rise was due to supply disruptions, including those in Canada and Nigeria.
“Unless there is a halt in supply, the market lacks material (strength) to go higher because the inventory levels are high,” Hamada said on Wednesday.
Oil prices were buoyed by a rise in U.S. stocks, with the Dow Jones industrial average, the S&P 500 and the Nasdaq composite all closing up.
Oil prices shrugged off the impact from a strong U.S. dollar which hovered close to a 10-week high against the euro in Asian trade on Wednesday.
A strong dollar typically makes greenback-denominated oil more expensive for holders of other currencies.
Iraq is pumping about 4.5 million bpd now and is aiming to boost that to between 5.5 million and 6 million bpd by 2020, the head of Iraq’s State Oil Marketing Organisation (SOMO) said.
(Additional reporting by Osamu Tsukimori in TOKYO; Editing by Joseph Radford and Sherry Jacob-Phillips)