Oil prices on Wednesday witnessed an increase above $50 a barrel, helped by an industry report showing a large drop in U.S. crude inventories and on expectations that Britain will vote to stay in the European Union in an impending referendum.
U.S. crude stockpiles fell by 5.2 million barrels last week, the American Petroleum Institute (API) said on Tuesday, a figure three times more than that projected by industry analysts.
Official inventory data is due at 10:30 a.m. from the U.S. Department of Energy (DOE).
Some market participants hailed with disbelief the API data, which is based on voluntary reporting by its members. The trade group’s numbers have in the past been widely off the mark from those published by the DOE.
“I still think we in the middle of ‘garbage time’ with price moves being driven less by humans with views and more by computers and technical systems,” said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina.
“I do think, however, that there are more people like myself that are generally unimpressed with the draws as of late and are questioning general demand trends that looked absolutely ballistic in Q1, and have appeared to be a bit less impressive as of late as per the stock data that we can see.”
Petromatrix oil analyst Olivier Jakob agreed, saying: “There is a risk that the DOE will not show a stock draw of the same magnitude.”
Oil also benefited from a boost in risk appetite in global markets as investors were cautiously optimistic about a “Remain” vote in Britain’s referendum on Thursday.
Brent crude’s front-month contract was up 33 cents at $50.94 a barrel by 9:27 a.m. EDT (1427 GMT).
U.S. crude’s front-month rose 38 cents to $50.83, its first rise above $50 since June 10.
Oil also drew support as the dollar weakened against a basket of currencies after cautious comments on the U.S. economy by Federal Reserve Chair Janet Yellen, who virtually ruled out a July interest rate hike. A weaker greenback makes dollar-denominated oil cheaper for holders of the euro and other currencies.
In other industry news, top crude exporter Saudi Arabia said it may reprise its role of balancing supply and demand once the global market for oil recovers.
“Despite the surplus in global oil production and lower prices, the focus of attention remains on countries such as Saudi Arabia which, due to its strategic importance, will be expected to balance supply and demand once market conditions recover,” Energy Minister Khalid al-Falih said on Wednesday.
“The Kingdom’s oil policies are rooted in responsibility, and Saudi Arabia is seeking to maintain that balance while also giving heed to moderate prices for producers and consumers,” Falih said in the statement on Aramco’s website. He made the comments in the United States where he is accompanying Saudi Deputy Crown Prince Mohammed bin Salman.