Oil prices rise after unexpected decline in US crude stockpiles

Oil climbed after a government report showed that US crude inventories unexpectedly declined.

Futures rose as much as 3.3 per cent. Crude stockpiles fell 3.41 million barrels last week, the Energy Information Administration said. Analysts surveyed by Bloomberg had projected a 750,000-barrel gain. Crude output fell to 8.8 million barrels a day, the lowest since September 2014. Refineries usually bolster operating rates in May to meet summer gasoline demand, which leads to lower crude supplies in months ahead. "The market has to be happy with these inventory numbers," said Rob Haworth, a senior investment strategist in Seattle at US Bank Wealth Management, which oversees $125 billion of assets. "It's a little early in the season to see crude inventories drop. We are also getting lower production, which is very bullish."

West Texas Intermediate for June delivery rose $1.31, or 2.9 per cent, to $45.97 a barrel at 11:41 am on the New York Mercantile Exchange. The contract dropped as much as 1.6 percent to $43.96 earlier. Total volume traded was 54 percent above the 100-day average.

Brent for July settlement rose $1.60, or 3.5 percent, to $47.12 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a 44-cent premium to July WTI.

Crude inventories fell to 540 million barrels in the week ended May 6, dropping from the highest level since 1930, the EIA data show. The biggest decline occurred on the Gulf Coast, where supplies slipped 1.42 million barrels. Supplies at Cushing, Oklahoma, the delivery point for WTI and the nation's biggest oil-storage hub, climbed by 1.52 million barrels to a record 67.8 million.

Refineries reduced operating rates by 0.6 percentage point to 89.1 per cent of capacity. US refiners typically increase utilisation in April and May as they finish maintenance before the summer peak driving season.

Prices also climbed because of the disruption of supply from Nigeria. Royal Dutch Shell Plc invoked a legal clause to allow it to halt deliveries of Bonny Light, a key export grade, after a pipeline leak in Nigeria. Shell and Chevron Corp are evacuating workers from the Niger Delta because of security fears.