Oil extends gains after big US crude stock draw

Oil prices rose more than 1.5 per cent on Thursday after US industry data showed a large drawdown in crude stocks, reflecting the temporary impact of an Atlantic storm.

US crude stocks fell 12.1 million barrels last week, data from the American Petroleum Institute showed after the market settled on Wednesday, compared with expectations for an increase of around 200,000 barrels.

Benchmark Brent crude oil was up 80 cents a barrel at $48.78 by 0820 GMT, after settling up 72 cents on Wednesday.

US light crude was up 90 cents at $46.40 a barrel, having ended the previous session up 67 cents.

US crude stocks have been at record highs in the last two years, thanks partly to a shale boom that has boosted output.

But Tropical Storm Hermine, which threatened the Gulf Coast refining region last week before moving to the US East Coast, led to the loss of US oil production.

The US government said on August 29 that 11.5 per cent of Gulf of Mexico output was shut in as a precautionary measure.

"The big crude draw was a temporary move," said Tamas Varga, analyst at London brokerage PVM Oil Associates. "The big picture is bearish. The API stats are only a road bump on the way down," added Varga.

Oil was also buoyed by robust trade data from China, which showed its crude imports in August surged by nearly a quarter from a year ago to the second-highest amount ever, driven by independent refiners as they rushed to cash in on low oil prices before import quotas expire in December.

Oil hit a one-week high on Monday after Russia and Saudi Arabia agreed to cooperate on stabilising the oil market. Prices have since fallen due to uncertainty over a possible deal by producer nations to freeze output, particularly after a meeting in Doha in April ended without such an agreement.

The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers such as Russia are expected to discuss the issue at informal talks in Algeria from September 26-28.

Many analysts expect oil prices to decline ahead of the OPEC meeting as markets are well supplied.

"We are at the top end of the recent price range at the moment and will move towards the lower end," said Carsten Fritsch, senior analyst at Germany's Commerzbank in Frankfurt.