Oil Prices Rise on US Stockpile Speculation

Oil rose further above $50 a barrel on Wednesday supported by an industry report that showed a large drop in USA crude inventories and a boost in investor risk appetite ahead of Britain’s referendum on European Union membership.

The Department of Energy said commercial stockpiles last week dropped by 900,000 barrels, far fewer than the 1.5 million forecast by analysts, an indication that the persistent supply glut is not easing as quickly as expected.

Data from the US Energy Information Administration were “quite disappointing” with only a modest drawdown in crude stocks and a jump in gasoline stocks, said Houston energy consultant Andy Lipow. It closed down 74 cents, or 1.5 per cent, at US$49.88 a barrel yesterday. It was the fifth consecutive week of draw downs for crude inventories.

WTI fell 72 cents, or 1.4 percent, to settle at $49.13.

Gasoline stockpiles increased by 627,000 barrels to 237.6 million barrels.

Brent crude, the global oil benchmark, rose 0.9% to $51.07 a barrel on London’s ICE Futures exchange. The greenback determines demand for dollar-denominated oil among holders other currencies when other fundamental factors are less compelling. Both inventories are still well above the average range.

For the rest of this week, the oil market’s “focus will be on what is happening with the United Kingdom”, Michael Wittner, the New York-based head of oil-market research at Societe Generale, said by telephone.

“We would steer clear of either long or short positions at current price levels”, he wrote, adding that he will reevaluate his stance after the referendum. Off-topic, inappropriate or insulting comments will be removed.