Oil Rises to 8-week High on U.S. Inventory Draw

 

Oil prices traded close to eight-week highs on Thursday, boosted by a steeper-than-expected slide in U.S. crude inventories last week.

 

Brent crude futures dipped by 2 cents to $50.95 a barrel at 1346 GMT, after rising about 1.5 percent in the previous session.

 

U.S. West Texas Intermediate futures slipped 1 cent at $48.74 a barrel.

 

Both contracts traded lower earlier in the session on a stronger dollar, but recovered most of the lost ground. A stronger U.S. currency makes dollar-denominated crude more expensive for investors holding other currencies.

 

On Wednesday, the U.S. Energy Information Administration reported a 7.2 million barrel drop in U.S. inventories in the week to July 21, much more than the 2.6 million barrels forecast.

 

"As encouraging as this may seem, the price recovery won’t begin in earnest until evidence of U.S. oil rebalancing is mirrored on a global scale," Stephen Brennock at oil brokerage PVM said.

 

Expectations that the long-oversupplied market was moving towards balance were also supported by this week's news that Saudi Arabia planned to limit crude exports to 6.6 million barrels per day (bpd) in August, about 1 million bpd below the level last year.

 

Kuwait and United Arab Emirates, fellow members of the Organization of the Petroleum Exporting Countries, have also promised export cuts.

 

U.S. shale producers including Hess Corp, Anadarko Petroleum (APC) and Whiting Petroleum (WLL) announced plans this week to cut spending this year due to low oil prices.

 

But some analysts say a slowdown in shale drilling may prove temporary.

 

"Recent evidence of a slowdown in U.S. upstream activity has been exaggerated and will if anything be transitory," Brennock said. "Instead, a strong finish to the year is on the cards with the advent of $50 a barrel safeguarding the rebound in U.S. tight oil supply."

 

U.S. fuel exports are on track to hit another record in 2017, making foreign fuel markets increasingly important for the future growth prospects and profit margins of U.S. refiners.

 

In a sign Europe's major energy firms are turning a corner after a three-year slump, Royal Dutch Shell (RYDAF), France's Total and Norway's Statoil (STO) reported sharp rises in cash flow from second quarter operations.