Oil jumps after surprise
drop in U.S. crude inventories
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[September 21, 2016]
By Amanda Cooper
LONDON (Reuters) - Oil prices jumped 2
percent on Wednesday after a surprisingly large drop in U.S. crude
inventories and as an oil services workers strike in Norway
threatened to cut North Sea output.
Brent crude futures were up 91 cents at $46.79 per barrel by 1113
GMT, while West Texas Intermediate (WTI) crude futures rose by 96
cents to $45.01 a barrel.
Oil took its cue from American Petroleum Institute (API) data which
showed a 7.5 million barrel drop in U.S. crude inventories to 507.2
million barrels, almost twice the fall expected by analysts.
"Oil's got its own pretty positive drivers at the moment. The API
surprise draw overnight is obviously leading to the question of
whether we are going to see the same in the official inventory
today," CMC Markets strategist Jasper Lawler said.
Official storage data is due to be published by the U.S. Energy
Information Administration (EIA) later on Wednesday.
Adding to the upward price momentum was an oil service workers
strike in Norway that could affect output from western Europe's
biggest crude producing region.
Nevertheless, analysts said any gains could be tempered by caution
ahead of the Federal Reserve's Federal Open Market Committee (FOMC)
decision on interest rates later on Wednesday.
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Economists do not expect a change in rates but any indication from
the Fed on the outlook for economic growth could have an impact on
the dollar, and in turn, on oil.
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"I don't expect the Fed to do anything and I don't expect a 'hawkish hold'
either. But a bit of dollar weakness should support the backdrop for oil," CMC's
Lawler said.
"Wednesday has become 'Big Wednesday' for oil traders, with not only the FOMC
but also the EIA crude inventory numbers out. Should they (EIA) follow the
unexpected drawdown like the API and we get no FOMC rate hike, oil bulls may
well have reason to be cheering after a tough couple of weeks," Singapore-based
brokerage Oanda said.
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Key for the market is next week's meeting in Algeria between producers from the
Organization of the Petroleum Exporting Countries (OPEC) and Russia to discuss
measures to rein in oversupply, including an output freeze at current levels,
but analysts said they did not expect significant results.
"Even with a freeze - which would still mean OPEC production is at record levels
- we will still be in an oversupplied market," said Matt Stanley, a fuel broker
at Freight Investor Services (FIS) in Dubai.
(Additional reporting by Henning Gloystein and Mark Tay in Singapore; editing by
David Clarke)
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