Oil gains on surprise drawdown in United States crude inventories

Oil gains on surprise drawdown in United States crude inventories

Both have erased their losses from last week, when concerns over a possible trade war between the two largest economies contributed to declines of more than 4 percent.

In addition, possible military action by the USA and Saudi Arabia in Syria creates a high risk for safe production and exports of crude oil from the region and the kingdom, which could keep upward pressure on crude prices, experts warned.

"There is a lot of positive news for the recent move higher in oil", including tensions between the USA and Russian Federation and easing trade war talk with China, says Long Leaf Trading's Scott Gecas, also listing last week's inventory report that showed a 4.6M-barrel decline in US crude stocks, Middle East tension from the Syrian chemical attack and the possibility on renewed USA sanctions on Iran.

Despite a softening of trade concerns, oil markets still face an abundance of supplies that puts pressure on producers to keep their prices competitive in order not to lose market share.

US West Texas Intermediate (WTI) crude futures for the May contract edged higher by 1.2 percent to $64.22 per barrel, while global benchmark Brent futures for June delivery climbed by 1.2 percent to $69.53 per barrel.

Brent crude futures were at $67.42 per barrel, up 31 cents, or 0.5 percent.

Investors looked forward to data on US crude inventories and Organisation of Petroleum Exporting Countries (OPEC) production levels.

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US crude inventories fell by 4.6 million barrels last week, compared with analysts' expectations for an increase of 246,000 barrels, EIA data showed on Wednesday.

Market players now looked ahead to fresh data on USA commercial crude inventories to gauge the strength of demand in the world's largest oil consumer and how fast output levels will continue to rise.

Departures from the accord would result in renewed sanctions against Iran, which would hurt its oil industry.

Previous US sanctions has already hit Iran's production by more than 1.2 million barrels per day (bpd).

"In addition to the risk of protectionism, there has been a significant change in the Trump administration that has raised risks of potential sanctions on key oil exporting countries including Iran, Venezuela and Russian Federation", U.S. bank JPMorgan said.

The American Petroleum Institute will publish its storage data later on Tuesday. "However, oil market fundamentals are tightening and oil prices looks set to be squeezed higher as long as OPEC+ sticks to its cuts".

"Oil prices remain rangebound with WTI oil right in the middle of the $60-$65 per barrel range that has largely held since January of this year", said William O'Loughlin, investment analyst at Australia's Rivkin Securities. The US Energy Information Administrations still expects production to total 10.7 million barrels a day this year - a record.

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