Oil climbs over 2pc, shrugs off API's US crude build

NEW YORK: Oil prices surged on Wednesday, shrugging off an unexpected build in U.S. crude stockpiles and rebounding from a four-day slump as Russia's central bank expressed caution on plans to boost oil supply.

Brent settled up $2.11, or 2.8 percent, at $77.50 a barrel. U.S. crude gained $1.48, or 2.2 percent, to $68.21.

Data from industry group American Petroleum Institute (API) showed that U.S. crude inventories rose unexpectedly last week, increasing by 1 million barrels against analyst expectations of a 525,000-barrel decline.

Prices were little changed in post-settlement trading despite the surprise stock build.

Oil has been pressured by reports that the Organization of the Petroleum Exporting Countries (OPEC) and Russia may ease up on output cuts in place since January 2017. The cuts have driven down global inventories and boosted prices, with global benchmark Brent reaching a 3-1/2-year high of $80.50 a barrel on May 17.

On May 25, sources told Reuters that Saudi Arabia and Russia are discussing raising oil output from OPEC and allied non-OPEC countries by around 1 million bpd.

On Wednesday, however, the Russian central bank said falling oil prices would pose a risk to the country's financial sector.

"It seems that somebody in the central bank is taking notice of the big drop in oil prices and sending a signal of, 'Hey, wait a second. We don't want these prices to fall too far,'" said Phil Flynn, analyst at Price Futures Group in Chicago.

U.S. crude's discount to Brent rose to as much as $9.31, with Brent supported as investors worried that U.S. sanctions could be cutting crude supplies from Iran.

"There's more concern on the Brent side that supply losses from Iran are harder to be made up," Flynn said.

India's Reliance Industries Ltd, owner of the world's biggest refining complex, plans to halt oil imports from Iran, two sources familiar with the matter said.

In Brazil, the FUP oil workers union said workers had joined the call for a nationwide strike on at least 20 oil rigs in the lucrative Campos basin and other areas of the country.

Protesters are calling for the resignation of Petroleo Brasileiro SA Chief Executive Officer Pedro Parente and a change to company fuel pricing policies. The company said production was not affected. Last week there was a strike by Brazilian truckers over high diesel prices. Ongoing unrest could threaten demand for fuels in Brazil, which U.S. data showed was the No. 8 energy consumer in 2016.