Oil jumps more than 1 percent as US gasoline stock draw overshadows crude build

NEW YORK: Oil prices rallied more than 1 percent on Wednesday after U.S. data showing a deep drawdown in gasoline stocks overshadowed crude inventories rising to 17-month highs, and as sanctions and blackouts in Venezuela helped tighten global supply.

International benchmark Brent futures rose $1.09 to $71.70 a barrel, or 1.5 percent, by 12:52 p.m. EDT (1652 GMT), after hitting a five-month high of $71.73 a barrel. U.S. West Texas Intermediate (WTI) crude oil futures climbed 68 cents to $64.66 a barrel, or 1.1 percent, holding just below its strongest since mid-November.

"At the end of the day, that big gasoline stock draw was more important to the market than the build in crude stocks because I think the crude build could easily be largely reversed next week," said Jim Ritterbusch, president of Ritterbusch and Associates. "We are overdue for a pop in exports."

U.S. crude stockpiles last week rose to their highest since November 2017 last week as imports increased, while gasoline inventories posted the steepest drawdown since September 2017, the Energy Information Administration said.

Crude inventories swelled by 7 million barrels  last week, far surpassing forecasts for an increase of 2.3 million barrels. Gasoline stocks, however, fell 7.7 million barrels, more than triple the 2 million-barrel drop analysts had expected.

Prices were also boosted by U.S. sanctions on oil exporters Iran and Venezuela, as well as supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+.

"With geopolitical risks continuing to impact production from Venezuela and Iran and now also potentially Libya and even Algeria, the crude oil market is likely to remain supported until the price reaches a level that is satisfactory for OPEC and Russia," said Ole Hansen, commodity strategist at Saxo Bank.

An OPEC monthly report released on Wednesday showed that Venezuela's oil output sank last month to a long-term low below 1 million barrels per day (bpd), due to U.S. sanctions and blackouts.

Protests led to the resignation of Algeria's veteran president this month, and armed clashes have erupted near the Libyan capital Tripoli, but political upheaval has yet to impact output in major North African producers.

A senior Russian official signaled that Moscow might seek to raise output, though President Vladimir Putin indicated on Tuesday that current prices suited Russia.

"The Russian camp is increasingly coy about extending supply cuts. Suffice to say this may throw a spanner in the works for a sustained price recovery," said PVM analyst Stephen Brennock.