Oil rises 2%, underpinned by US crude draw, weaker dollar

Oil prices rose about 2 percent on Thursday, rallying for a second day after a surprise U.S. crude inventory drop and ahead of talks next week between OPEC and other oil producers on curbing oversupply.

The dollar’s slide after Wednesday’s decision by the Federal Reserve to keep U.S. interest rates unchanged provided further support to oil and other greenback-denominated commodities, Reuters reports.
U.S. West Texas Intermediate (WTI) crude futures were up $1.05 or 2.3 percent, at $46.39 a barrel by 11:31 a.m. EDT (1531 GMT). Week-to-date, WTI was up about 8 percent for its largest weekly advance in a month.
Brent crude futures rose 80 cents, or 1.7 percent, to $47.63. It was up about 4 percent on the week.
WTI’s discount to Brent WTCLc1-LCOc1 was at its smallest since early August, reflecting the improved fundamentals for U.S. crude.
Oil has rallied since Wednesday’s report by the U.S. Energy Information Administration that crude stockpiles fell 6.2 million barrels last week, versus market expectations for a build of 3.4 million barrels. U.S. crude stocks have fallen by an unexpected 21 million barrels this month so far.
Even so, energy monitoring service Genscape reported on Thursday a build of about 213,000 barrels at the Cushing, Oklahoma delivery base for WTI futures for the week ended Sept. 20, traders said.
Cushing inventories are an important component of total U.S. stockpiles. The Genscape report, coming on top of a build of 526,000 barrels at Cushing reported by the EIA for the week ended Sept. 16, suggested that total U.S. stockpiles may start climbing again soon.
“We also feel that the market will need to recognize bearish aspects within the (EIA) data,” Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates said, citing rising U.S. crude production as one.
The U.S. crude drawdown contrasted with news that Russian oil output had hit a new record high above 11 million barrels per day. Libya also resumed this week export of its first oil cargo since at least 2014 from the port of Ras Lanuf. Nigeria’s Forcados crude stream oil was, meanwhile, due to restart at the end of September, for the first time since February.
Some analysts saw justification for oil to rise before the Sept. 26-28 talks in Algeria between the Organization of the Petroleum Exporting Countries and non-OPEC members on a potential output freeze.
“It’s only logical that a few days before that meeting, shorts will start covering and yesterday’s (U.S.) stock figures provided the perfect excuse,” PVM Oil Associates strategist Tamas Varga said.