Oil prices were boosted by the latest draw in API inventories, while weaker Chinese oil output data increased optimism that the global oil market was moving closer to balance, which supported prices.
Oil futures dipped sharply lower in early US trading on Tuesday with a retreat to the $49.80 area from $50.40, but there was a steady recovery during the US session with buying on dips.
Prices then moved sharply higher following the latest American Petroleum Institute (API) inventories data with an unexpected draw of 3.8mn barrels in the latest week compared with a forecast build of close to 2.5mn.
The large drawdown in Cushing inventories had been expected due to pipeline issues, while there was another sharp dip in distillates, which continued to underpin confidence in declining fuel inventories. WTI futures strengthened to $50.70 from $50.30 following the data and maintained a firm tone during the Asian session on Wednesday despite some pressure for profit taking.
The latest Chinese data recorded a sharp drop in output for September with a 9.8% annual decline to 3.89mn bpd and close to the lowest level for six years, which maintained expectations of stronger Chinese imports, especially given an increase in refining rates, which would help reduce over-supply concerns.
There were also comments from Saudi Arabian Oil Minister Khalid al-Falih that oil markets were at the end of a considerable downturn as demand and supply were rebalancing. OPEC Secretary General Barkindo was optimistic about the prospects for a full agreement on planned production cuts at the November 30th OPEC meeting.
A generally softer dollar tone also helped cushion prices and, after a spell of consolidation during the Asian session, there were renewed gains to test the $51.0 p/b level in Europe with December Brent futures trading close to the $52.50 level.
The latest Energy Information Administration (EIA) inventories data will be important on Wednesday, especially as there has been generally very choppy trading following the data over the past few weeks. As well as the headline release, data on products and US production levels will also have an important influence on futures prices.