Oil prices rise on large US stockpile draw, hurricane jitters

U.S. crude stocks dropped by about 11.5 million barrels in the week ended Aug. 25, according to market sources citing American Petroleum Institute figures on Tuesday.

Official crude stockpile data from the U.S. Energy Information Administration is due at 1430 GMT on Wednesday. (Image credit: Reuters)

Oil prices extended gains on Wednesday after industry data showed a large draw in crude inventories in the U.S., the world's biggest fuel consumer, and as concerns about a hurricane in the Gulf of Mexico kept investors on edge. Brent crude futures for October rose 17 cents, or 0.2 per cent, to $85.66 a barrel by 0133 GMT. The October contract expires on Thursday and the more active November contract was at $85.08 a barrel, up 17 cents. U.S. West Texas Intermediate crude futures gained 24 cents, or 0.3 per cent, to $81.40, logging its fifth session of gains.

Both benchmarks rallied more than a dollar a barrel on Tuesday as the U.S. dollar slid after the prospects of further interest rate hikes eased following softer U.S. job data. A weaker greenback makes dollar-denominated oil less expensive for investors holding other currencies, boosting demand.

U.S. crude stocks declined by about 11.5 million barrels in the week ended Aug. 25, according to market sources citing American Petroleum Institute figures on Tuesday. Analysts polled by Reuters prior to the data had estimated on average a draw of 3.3 million barrels.

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The bigger-than-expected draw in U.S. crude oil stockpiles is positive for the oil market as it suggest firm demand, said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

At the same time, investors bought futures on concerns surrounding Hurricane Idalia, which is churning over the Gulf of Mexico to the east of major U.S. oil and natural gas production sites.

"Concerns over the Hurricane Idalia prompted fresh buying," said Tazawa.

The offshore Gulf of Mexico accounts for about 15 per cent of U.S. oil output and about 5 per cent of natural gas production, according to the Energy Information Administration (EIA).

Oil major Chevron Corp CVX.N evacuated some staff from the region, but production was continuing at the sites its operates in the Gulf of Mexico.

While crude oil stockpiles drew, the API data showed that gasoline inventories rose by about 1.4 million barrels and distillate fuels, including diesel and jet fuel, rose by about 2.5 million barrels.

Official crude stockpile data from the EIA is due at 1430 GMT on Wednesday.

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