Oil prices rose on Wednesday as industry data showed a larger-than-expected drawdown in US crude stockpiles, while expectations for an extended shutdown of a major North Sea crude pipeline also continued to bolster markets.
Brent crude was up 64 cents, or 1 per cent, at $63.98 a barrel by 0413 GMT. It had settled down $1.35, or 2.1 per cent, on Tuesday on a wave of profit-taking after news of a key North Sea pipeline shutdown helped send the global benchmark above $65 for the first time since mid-2015.
US West Texas Intermediate crude was up 42 cents, or 0.7 per cent, at $57.56 a barrel, having settled the previous session down 85 cents.
Britain’s biggest pipeline from its North Sea oil and gas fields is likely to be shut for several weeks for repairs, its operator said on Tuesday.
The pipeline, which carries about 450,000 barrels per day (bpd) of Forties crude, was shut after cracks were found. It has particular significance to global markets because Forties is the largest out of the five crude oil streams that underpin the dated Brent benchmark.
A number of producers, including BP and Royal Dutch Shell, said they had closed down oil fields in response.
“Four weeks is much longer than most projections,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo. “The pipeline incident came just when the markets are tightening on coordinated production cuts.”
After settlement on Tuesday, industry group the American Petroleum Institute said crude stocks in the United States fell by 7.4 million barrels last week. That is almost twice the decline of analysts’ expectations for a drop of 3.8 million barrels.
Gasoline stocks rose by 2.3 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.5 million-barrel gain. Distillate fuels stockpiles, which include diesel and heating oil, rose by 1.5 million barrels, compared with expectations for a 902,000-barrel gain, the API data showed.
The US government’s Energy Information Administration releases its weekly oil report on Wednesday.
Selling had gained pace on Tuesday after the US Energy Information Administration said in its monthly short-term energy outlook that US crude oil output will rise by 780,000 barrels per day (bpd) to a record-high of 10.02 million bpd in 2018.