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Oil hovers near eight-month highs on U.S. inventory draw

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Reuters TOKYO
Last Updated : Jun 08 2016 | 8:13 AM IST

By Osamu Tsukimori

TOKYO (Reuters) - Oil prices stood steady near their highest level in about eight months on Wednesday, helped by industry data showing a larger-than-expected drawdown in U.S. crude inventories and by worries about attacks on Nigeria's oil industry.

London Brent crude for August delivery was unchanged at $51.44 a barrel by 0151 GMT, after settling up 89 cents on Tuesday. It earlier touched $51.55, the highest since Oct. 12.

NYMEX crude for July delivery was up 4 cents at $50.40 a barrel, after closing up 67 cents on Tuesday to settle above $50 for the first time since last July.

U.S. commercial crude inventories fell by 3.6 million barrels last week, data from industry group American Petroleum Institute showed on Tuesday after the market settlement, compared with expectations for a 2.7 million barrel draw according to a revised Reuters poll.

The U.S. Energy Information Administration (EIA) will issue official inventory numbers at 1430 GMT on Wednesday.

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Worries about global supply disruptions also supported the market, analysts said. The southern Delta swamps in Nigeria have been hit by militant attacks on oil and gas pipelines which have brought the African nation's oil output to a 20-year low.

Nigeria's government said it would scale down a military campaign and talk to the militant group.

Takayuki Nogami, senior economist at Japan Oil, Gas and Metals National Corp (JOGMEC), said the start of summer gasoline season, supply disruptions in Nigeria and Canada and talk of a possible delay in the timing of U.S. rate hike have combined to push up the market.

"The Nigerian militants have pledged to continue attacks until production becomes zero, so there are worries over a further slump in output," he said.

The EIA on Tuesday raised its 2016 U.S. oil demand growth forecast, saying demand will grow by 220,000 bpd from 140,000 bpd previously.

But concerns about global demand weighed on prices. The World Bank slashed its 2016 global growth forecast on Wednesday to 2.4 percent from the 2.9 percent estimated in January due to stubbornly low commodity prices, sluggish demand in advanced economies, weak trade and diminishing capital flows.

Japan's economy grew faster than initially estimated in the first quarter, data showed on Wednesday, as capital spending fell less than was first reported, but worries remain over slow consumer spending and weak exports.

The market was waiting for China trade data due later in the day.

(Reporting by Osamu Tsukimori; Editing by Joseph Radford)

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First Published: Jun 08 2016 | 8:11 AM IST

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