Oil Prices Jump On Large US Crude Stock Draw

US oil inventories mark sharpest decline in 30 years

The U.S. Energy Information Administration said on Thursday that U.S. commercial crude inventories fell by 14.5 million barrels to 511.4 million barrels as of September 2.

The Energy Department said in a report released Wednesday that the Strategic Petroleum Reserve (SPR), which includes 60 underground tanks on the Gulf of Mexico coast and holds 695 million barrels of oil, would face problems achieving its stated goal of releasing oil to the market in shortage situations.

West Texas Intermediate crude prices jumped more than 3 percent on news of the larger-than-expected inventory decline.

LONDON, Sept 9 US crude oil inventories plunged by more than 14.5 million barrels in the week ending on September 2, the largest weekly drop since 1999.

But crude is reported only once it has cleared US customs, a paperwork transaction rather than a physical movement.

Despite this decline, USA crude oil inventories are at historically high levels for this time of year, according to the EIA.

"We are in the hurricane season and last week's storm caused production disruptions and import delays", Norbert Rücker from the Zurich-based Julius BaerJBAXY -0.51 % bank said. Gulf Coast imports dropped to less than 2.5 million bpd, from 3.2 million bpd the week before, and the lowest level on record.

Analysts were looking for a draw last week of 625,000 barrels, while stocks rose 458,000 barrels on average this time of year from 2011-15.

Gasoline inventories also fell further than the API report had predicted. The dollar has been hit by data Tuesday showing a sharp fall in the key United States services sector, virtually wiping out any possibility of an interest rate hike this month from the Federal Reserve. Imports were up 1.5 percent since past year, the first increase in 21 months, hinting that domestic demand is increasing.

World demand will average 97.78 million barrels a day in 2017, a 20,000 barrel reduction from last month.

All eyes were on the release of official figures from the USA energy department, which will provide a better idea of the strength of demand in the world's top economy and crude consumer.

Refinery crude runs rose 315,000 bpd and utilization rates rose by 0.9 percentage point to 93.7 percent of total capacity, EIA data showed. The site cited an incident in 2013 when a 10 million barrel draw occurred as a result of a strong storm.

"Next week, crude stocks will likely rise dramatically as those ships offload this week", Williams added.

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