Oil prices rose more than 2 per cent on Wednesday, with U.S. crude settling at its highest in 15 months after the government reported a surprisingly large drop in inventories for the sixth week out of seven.
The U.S. Energy Information Administration (EIA) said crude stocks fell 5.2 million barrels in the week ended Oct. 14. Analysts polled by Reuters had expected the EIA to report a crude build of 2.7 million barrels.
It is common for crude stocks to build this time of year as refineries go into maintenance, producing less gasoline and other products. Refinery runs were only at 88 per cent of capacity last week, the EIA said.
The agency said U.S. crude imports slid by 912,000 barrels per day last week to 6.47 million bpd, the lowest since November 2015, helping push inventories lower.
"This lowest import pace in some 16 months is surprising given the fact that OPEC production has recently attained a record level that would imply easy availability," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
U.S. West Texas Intermediate (WTI) crude's front-month contract, November, closed up $1.31, or 2.6 per cent, at $51.60 a barrel for its highest settlement since July 14. Its session peak of $51.93 was also the highest in 15 months.
But with its expiry due on Thursday, the November contract saw lighter trades than December WTI, which hit a 5-month high of $52.22. The December contract will be front-month from Friday.
London-traded Brent, the world benchmark for crude, settled up 99 cents, or 1.9 percent, at $52.67.
Some market participants were not impressed by the crude inventory drop, citing instead the large gasoline build of 2.5 million barrels for last week versus forecasts for 1.3 million-barrel drop.
"While the headline number was bullish, we wouldn't call it extremely bullish," said Tariq Zahir, crude trader at Tyche Capital Advisors in New York.
Oil has rallied more than 15 per cent over the past three weeks after the Organization of the Petroleum Exporting Countries proposed to enforce from November its first output cut since 2008 to rein in a global glut.
Khalid al-Falih, energy minister of Saudi Arabia, which dominates OPEC, told the Oil & Money conference in London "fundamentals are improving and the market is clearly balancing" after prices fell below $30 from 2014 highs above $100.
But Rex Tillerson, chief executive of Exxon Mobil, the world's largest listed oil firm, later told the same conference he expected U.S. shale oil output, responsible for much of the glut, to rebound at current prices.