By TIMOTHY PUKO And GEORGI KANTCHEV
Updated Sept. 23, 2015 11:18 a.m. ET
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Oil prices extended gains after data showed a larger-than-expected draw in U.S. crude stockpiles.
The U.S. Energy Information Administration said crude stocks fell by 1.9 million barrels last week, compared with analysts’ expectations for a 100,000-barrel draw. Traders had already been betting on rising prices since late Tuesday after the American Petroleum Institute reported that inventories declined by 3.7 million barrels, foreshadowing the EIA data.
“They needed these draws, they got the draws,” said Peter Donovan, broker for Liquidity Energy in New York. “The numbers are pretty much as expected.”
Light, sweet crude for November delivery traded up 52 cents, or 1.1%, to $46.88 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 79 cents, or 1.6%, to $49.87 a barrel on ICE Futures Europe.
Domestic crude inventories fell to 454 million barrels last week, from 456 million, the EIA said. Gasoline stockpiles grew by 1.4 million barrels, compared with analysts’ expectations for a 1-million-barrel increase. Diesel supplies fell by 2.1 million barrels, compared with expectations for a 1.4 million-barrel addition.
Both markets followed crude higher, but diesel, buoyed by the surprise draw, saw stronger gains. Gasoline futures recently gained 1.6% to $1.4395 a gallon. Diesel futures advanced 1.8% to $1.5599 a gallon.
Gains are likely to be limited, however, by the large oversupply still hanging over the global market, market participants said. Mr. Donovan noted that draws in stockpiles recently have led to only momentary spikes in prices.
Downbeat data from China had already tempered gains earlier in the day. A measure of Chinese factory output in September fell to its lowest level since the financial crisis, the latest evidence of an economic slowdown in the world’s second-biggest oil consumer.
While U.S. output has started to ease, many believe it is not enough to soak up a flood of oil coming from elsewhere. The latest Chinese data cast doubt on hopes that strong demand for crude will alleviate the global oversupply that has battered prices since last year.
The preliminary reading of Chinese manufacturing activity compiled by Caixin Media Co. and research firm Markit Ltd. fell to a six-and-a-half year low of 47.0 in September from a final reading of 47.3 in August. A reading above 50 indicates expansion from the previous month, while a reading below that indicates contraction.
“Yet another economic data point that suggests oil demand growth is not likely going to be the solution to the oversupplied global oil market,” Dominick Chirichella, analyst at the Energy Management Institute, said in a note.
A surprise currency devaluation in China sent global markets into a tailspin in early August. Commodities were particularly hard hit, with U.S. oil prices falling below $40 a barrel last month for the first time since the financial crisis.
While most analysts expect prices to rise from here, there is less conviction about the strength of that recovery. A survey of 13 investment banks by The Wall Street Journal cut their average forecast for Brent crude, the international price gauge, by $9 to $58.70 a barrel, compared with last month’s survey. Only three of the banks see Brent rising above $70 a barrel in 2016.
