Oil prices jumped more than 2 percent on Wednesday after the U.S. government reported a larger-than-expected weekly drawdown in crude inventories, adding fuel to an existing rally on fading concerns over Britain’s exit from the European Union.
The potential for an oil workers strike in Norway and a crisis in Venezuela’s energy sector also added support to crude futures.
The U.S. Energy Information Administration said crude stockpiles fell by 4.1 million barrels for the week to June 24, the sixth consecutive week of drawdowns.
That was more than the 2.4 million barrels expected by analysts in a Reuters poll. The American Petroleum Institute trade group had published a drawdown similar to the EIA’s on Tuesday, boosting crude futures in post-settlement trade.
“The report is bullish with the large crude oil inventory decrease of over 4 million barrels,” said John Kilduff, partner at New York energy hedge fund Again Capital. “The stepped-up demand by refiners and a plunge in imports helped create the decline.”
U.S. crude oil production fell by 55,000 barrels a day, according to preliminary weekly figures. That follows a decline of 39,000 bpd in the previous week.
Brent crude futures were up $1.27, or 2.6 percent, at $49.85 per barrel at 11:53 a.m. ET (1553 GMT).
U.S. crude had climbed $1.24, or 2.6 percent, to $49.09 a barrel.
But the EIA also said gasoline stocks had an unseasonably large increase of 1.4 million barrels, compared with analysts’ expectations for a 58,000-barrel gain. On the East Coast, gasoline stockpiles rose to record levels.
That made some traders bearish on their longer-term view of oil.
“We firmly feel any rally will stall out near the $50 level, as we have seen unjustified gains in previous weeks for gasoline based on the build number we have now,” said Tariq Zahir, crude spreads trader and managing partner at Tyche Capital Advisors in New York.
Standard Chartered said that it expected oil prices to return to $50 per barrel rapidly as the Brexit referendum’s impact on demand was limited.
Despite that, some bankers said that the knock-on effects from Britain’s EU exit vote could continue for some time.
“Uncertainty and volatility … are both likely to be persistent for a long time to come,” Citi analysts said.
On the supply side, a looming strike by Norwegian oil workers threatened to cut output from the biggest North Sea producer.
In crisis-struck Venezuela, oil producers and refiners were struggling to keep output up due to power outages and equipment shortages, traders said.
Despite the tightening supply-side, there are concerns that a looming refined products glut, especially in Asia, might spill back into the crude market as refiners cut output.
— CNBC’s Tom DiChristopher contributed to this story.