Oil rose further above $50 a barrel on Wednesday after an industry report showed a large drop in U.S. crude inventories, with analysts expecting volatile trading ahead of Britain’s referendum on EU membership.
U.S. crude inventories fell by 5.2 million barrels, the American Petroleum Institute (API) said on Tuesday, far more than analysts expected. Official stocks data is due later on Wednesday from the U.S. Department of Energy. [EIA/S]
“What we have is basically the leftovers of the reaction from the API report,” said Olivier Jakob, oil analyst at Petromatrix, of oil’s rally. “There is a risk that the DOE will not show a stock draw of the same magnitude.”
Brent crude was up 33 cents at $50.95 a barrel at 0859 GMT. U.S. crude climbed 46 cents to $50.31, marking its first rise above $50 since June 10.
Oil also benefited from a boost in risk appetite in global markets as investors were cautiously optimistic about a “Remain” vote in the EU referendum on Thursday.
“Though some may be forgiven for thinking that the outcome is a foregone conclusion, the inconsistency between the betting money and the polls mean that conditions are ripe for a fresh bout of volatility,” said Stephen Brennock of oil brokers PVM.
Riskier markets also drew support from Federal Reserve Chair Janet Yellen’s cautious comments on the U.S. economy the previous day, in which she virtually ruled out a July rate rise.
The dollar fell against a basket of currencies. A weaker dollar makes oil cheaper for other currency holders and tends to support oil prices.
The drop in U.S. crude inventories, if confirmed by the DOE figures at 1430 GMT, would be the fifth straight weekly decline and adds to signs that a supply glut which has halved oil prices in the last two years is easing.
Other signs include lower U.S. shale oil production due to reduced investment in the wake of the price collapse, underpinning a wider drop in non-OPEC supply in 2016.
A spike in unplanned supply losses has also supported prices this year. Nigerian rebels who have been sabotaging the country’s crude exports denied on Tuesday they had agreed to a ceasefire, lending support to prices.