London: Oil rose above $71 a barrel on Wednesday following a large drop in crude inventories in the United States, the world’s top energy consumer, and output disruptions from militant attacks in Nigeria.
US crude futures were trading up $1.25 to $71.14 a barrel by 3:38pm, having risen to as high as $71.28. London Brent crude rose $1.28 to $70.58.
Weekly oil data from a US industry group released late on Tuesday helped oil prices to reverse the day’s loss, which had been fuelled by weak US consumer confidence.
Data from the American Petroleum Institute showed on Tuesday a 6.8 million barrel decline in US crude inventories, larger than analysts’ forecast for a drawdown of 2 million barrels.
“Maybe we have already seen the peaks in the stock levels and we could start entering a phase where we see a slow reduction (in stock levels),” Olivier Jakob with Petromatrix said.
Market focus has now shifted to a separate set of data from the US government, which is seen as more reliable by investors, due out later on Wednesday.
The US Energy Information Administration (EIA) is also expected to show a fall in crude inventories due to higher refinery runs ahead of the Independence Day weekend.
Opec’s policy to keep output cuts intact since last year has started to be reflected into some statistics and traders would be watching US crude import volumes in the EIA statistics, Jakob said.
Export disruptions from Nigeria, an Opec member and Africa’s top oil producer, have also provided support to oil prices.
The recent escalation of civil unrest in Nigeria’s oil rich Delta region has hobbled its output.
On Tuesday, oil major Royal Dutch Shell said attacks by Nigerian militants have cut its output to around half of what it was producing earlier this year.
Oil prices, which have tumbled from a record high of over $147 struck in July last year to the low $30s a barrel at the turn of the year, have rallied in recent months due mainly to hopes for economic recovery.
They marked a 42% gain in the second quarter - the highest quarterly gain since 1990.