Oil jumps on first U.S. inventory draw since March; Brent up 4 percent

By Barani Krishnan

NEW YORK (Reuters) - Oil prices jumped on Wednesday, with Brent surging about 4 percent for a second day in a row, after the U.S. government unexpectedly reported crude inventories fell for the first time since March.

The surprise stockpile drop added to concerns over supply disruptions in Canada and Nigeria that had fuelled an oil rally this week.

The U.S. Energy Information Administration (EIA) said crude inventories fell 3.4 million barrels last week, compared with analysts' expectations for an increase of 714,000 barrels and the American Petroleum Institute's (API) build of 3.5 million barrels in preliminary data issued on Tuesday. [EIA/S] [API/S]

 

The EIA report "has been quickly viewed as bullish, with the crude draw just about exactly opposite to what API had," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

Oil markets extended their gains after the data. Brent crude futures were up $1.83, or 4 percent, at $47.35 per barrel by 1:56 p.m. EDT (1756 GMT).

U.S. crude's West Texas Intermediate futures gained $1.47, or 3.3 percent, to $46.13.

The EIA, in a separate report on Wednesday, said it expected Brent to trade at $76 a barrel in the next year on continued increase in demand.

Prices rose earlier as Shell announced a Nigerian pipeline closure while Canadian energy firms tried to restart closed facilities that had halted more than 1 million barrels per day (bpd) in supply after a huge wildfire in Alberta's oil sands region.

"We were not totally surprised with the draw after the shut-in in Canadian production," Tariq Zahir, trader and managing partner at Tyche Capital Advisors, New York, said, referring to the EIA report. "But while the fires have taken tar sands production offline, we believe this will not be a prolonged event."

In Nigeria, a refinery official said crude flows have been halted to the Kaduna and Warri refineries after a pipeline attack. Nigeria's state petroleum company said on its website the Kaduna refinery produces 1.5 million liters (12,972 barrels) of fuel per day, while the one in Warri had a capacity for 125,000 bpd.

On Tuesday, Royal Dutch Shell's Nigerian unit said it had declared force majeure on Bonny Light exports following the closure of the Nembe Creek Trunk line for repairs after a leak.

(Additional reporting by Simon Falush in LONDON and Henning Gloystein in SINGAPORE; editing by Marguerita Choy and Meredith Mazzilli)