Oil prices gain nearly 2% after drop in U.S. crude inventories

NEW YORK (Reuters) - Oil prices rose nearly 2% on Wednesday after a larger-than-expected decline in U.S. crude stockpiles helped ease worries about weakening oil demand caused by the trade war between Washington and Beijing.

FILE PHOTO: A pump jack operates in the Permian Basin oil and natural gas production area near Odessa, Texas, U.S., February 10, 2019. REUTERS/Nick Oxford/File Photo

Brent crude LCOc1 futures settled 98 cents, or 1.7%, higher at $60.49 a barrel. West Texas Intermediate crude CLc1 ended at $55.78 a barrel, rising 85 cents, or 1.6%.

U.S. crude oil inventories fell last week by 10 million barrels, compared with analysts’ expectations for a decrease of 2.1 million barrels, as imports slowed, the Energy Information Administration said.

“There’s a lot of big numbers here, but it’s all on the import number, which is pretty impressive,” said Bob Yawger, director of energy futures at Mizuho in New York.

Net U.S. crude imports USOICI=ECI fell by 1.51 million barrels per day to 2.9 million bpd, while imports in the Gulf Coast region dropped to their lowest on record at 1.2 million bpd. Over the past four weeks, crude oil imports averaged about 7 million bpd, 12.3% less than the same four-week period

last year.

U.S. gasoline stocks USOILG=ECI fell by 2.1 million barrels, compared with analysts' expectations in a Reuters poll for a 388,000-barrel drop.

“It was an incredibly bullish report, one of the more bullish we’ve had in a while, with draws across the board and of course the massive crude oil drop, which was generated by another drop in imports,” said John Kilduff, a partner at Again Capital in New York. That draw down was likely due to a drop in Saudi exports to the U.S, Kilduff said.

GRAPHIC: U.S. crude inventories -

Brexit jitters boosted U.S. dollar .DXY, which generally moves inversely with oil prices, which limited oil gains, Kilduff said.

The dollar rallied as Prime Minister Boris Johnson moved to suspend Britain’s parliament for more than a month before Brexit, enraging opponents and raising the stakes in the country’s most serious political crisis in decades.

Concerns about the impact of the U.S.-China tariffs war on demand also kept oil prices from rising more.

U.S. President Donald Trump said on Monday that he believed China was sincere about wanting to reach a trade deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through “calm” negotiations.

On Tuesday, however, concerns resurfaced after China’s foreign ministry said it had not heard of any recent telephone call between the United States and China on trade, and that it hoped Washington could create conditions for talks.

Crude prices have fallen about a fifth from 2019 highs hit in April, partly because of worries that the trade war is hurting the global economy and could dent oil demand.

Morgan Stanley on Wednesday lowered its price outlook for the rest of the year for Brent to around $60 per barrel from $65 and for U.S. crude to $55 per barrel from $58 as it downgraded its demand growth forecast for this year and next.

Additional reporting by Shadia Nasralla in LONDON and Aaron Sheldrick in TOKYO, Jessica Resnick-Ault in New York; Editing by Marguerita Choy and Louise Heavens