Oil extends gain after big drop in US inventories


Bigger-than-expected: A file picture showing two offshore oil platforms in Port Fourchon, Louisiana. Stockpiles fell by 11.1 million barrels last week, according to the American Petroleum Institute. — AFP

Seoul: Oil extended gains after an industry report showed a bigger-than-expected drop in American crude inventories and as Iran all but ruled out a meeting with the United States.

Futures in New York climbed as much as 1.5% after a 2.4% jump Tuesday. The American Petroleum Institute said stockpiles fell by 11.1 million barrels last week.

That would be the largest decline since June if confirmed by government figures. The API also reported a 2.8 million barrel draw in distillates and gasoline inventories.

Oil is still heading for only its second monthly drop this year amid rising trade and growth pessimism. The prospect of more tension in the Persian Gulf is keeping the geopolitical risk premium intact after Iranian President Hassan Rouhani responded to President Donald Trump’s suggestion of a meeting by saying the United States must lift sanctions on the Islamic Republic first.

“The mammoth crude inventory draw has, at least for the time being, put to rest those US recessionary doom and gloom fears, ” Stephen Innes, managing partner at VM Markets Pte in Singapore, said in a note. The decline in gasoline and distillate stockpiles is “especially comforting to investors as we are entering the last long weekend of the peak US driving season, ” he said.

West Texas Intermediate crude for October delivery rose 55 US cents, or 1%, to US$55.48 a barrel on the New York Mercantile Exchange after climbing as much as 80 US cents earlier. The contract closed up US$1.29 on Tuesday.

Brent for October settlement advanced 42 UScents, or 0.7%, to US$59.93 a barrel on the ICE Futures Europe Exchange. It settled 1.4% higher on Tuesday. The global benchmark crude traded at a US$4.45 premium to WTI.

US crude inventories fell by 2.85 million barrels in the week through Aug 23, according to a Bloomberg survey of analysts. If confirmed by Energy Administration data, it will be the second drop in a row following two weeks of gains that raised recessionary fears.

The Organisation of Petroleum Exporting Countries and its allies said they expect a “significant” decrease in global crude inventories in the second half after they trimmed output more than planned.

The Joint Ministerial Monitoring Committee, composed of key nations from the OPEC+ coalition, said the group’s implementation of cutbacks was 159% in July.

Iran’s reaction to meeting with the U.S. highlights the challenges facing Trump after he signaled he could meet with Rouhani and perhaps ease restrictions. “We are interested in solving problems in a reasonable way, but we’re not interested in taking photos, ” Rouhani said in a televised speech to officials in Tehran.

“The key to changing the relationship is in Washington’s hands.” — Bloomberg


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