Oil gains 2% after draws in U.S. product inventories

NEW YORK: Oil prices rose more than 2% on Wednesday, boosted by draws in U.S. inventories of crude, gasoline and distillates that lifted investors' hopes for some return in fuel demand.

Brent crude futures rose $1.12, or 2.2%, to settle at $51.20 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose $1.1, or 2.3%, to settle at $48.12 a barrel.

U.S. crude inventories fell by 562,000 barrels in the week to Dec. 18 to 499.5 million barrels, the Energy Information Administration said on Wednesday.

Gasoline stocks fell by a surprise 1.1 million barrels in the week to 237.8 million barrels, the EIA said, while distillate stockpiles fell by 2.3 million barrels in the week to 148.9 million barrels, more than expected.

"We saw a modest recovery in distillate demand and gasoline demand that was indicative of the holiday season," said Andrew Lipow, president of Lipow Oil Associates in Houston.

"Those demand figures combined with gasoline and distillate inventory draws have helped to support the market this morning."

U.S. energy firms this week added oil and natural gas rigs for a fifth week in a row.

The oil and gas rig count, an early indicator of future output, rose 2 to 348 in the week to Dec. 23, energy services firm Baker Hughes Co said Wednesday.

A falling U.S. dollar also supported prices. A weak greenback makes dollar-denominated commodities such as crude oil cheaper for holders of other currencies.

Investors also kept an eye on Nigeria, where supply disruptions helped lift prices.

Exxon Mobil Corp issued a force majeure on the Qua Iboe crude oil export terminal last week after a fire hit the facility and injured two workers.

A source told Reuters production is expected to resume in early January.

The stream was expected to load about 180,000 barrels per day (bpd) in December and 150,000 bpd in January.

Still, oil markets remain jittery about the future recovery of oil demand as a new, highly infectious variant of the novel coronavirus has hit Britain, prompting a slew of countries to shut their borders to the country.

The number of Americans filing first-time claims for unemployment benefits unexpectedly fell last week, though remained elevated as more businesses faced restrictions and consumers hunkered down amid rising COVID-19 cases.