Oil rises 1.2%, settling at $48.41, after another weekly drop in US crude stockpiles

Key Points
  • U.S. commercial crude inventories fell by 3.3 million barrels in the week to Aug. 18, the Energy Information Administration reported.
  • Gasoline inventories were down 1.2 million barrels, more than expected.
  • Conflicting reports about production from Libya's main oil field fed concerns about oversupply.
Crude oil inventories down 3.3 million barrels
Crude oil inventories down 3.3 million barrels

Oil prices rose on Wednesday after U.S. crude inventories declined for the eighth straight week and a storm approached the Gulf Coast with the potential to disrupt oil and refined products output.

Brent crude, the international benchmark for oil prices, was up 69 cents, or 1.3 percent, at $52.56 per barrel by 2:26 p.m. (1826 GMT). U.S. West Texas Intermediate (WTI) crude futures rose 54 cents, or 1.1 percent, to $48.37 a barrel.

U.S. crude inventories fell 3.3 million barrels last week, compared with analyst expectations for a decrease of 3.5 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub fell 503,000 barrels, the Energy Information Administration said.

Meanwhile U.S. gasoline inventories were down 1.2 million barrels, compared with analyst expectations in a Reuters poll for a 643,000-barrel decline.

"Oil inventories continue their downward trend despite a significant increase in crude oil imports this week," said Andrew Lipow, president of Lipow Oil Associates in Houston, Texas.

Why one trader says bet on another crude rally
Why one trader says bet on another crude rally

Still he said, the market is shrugging off the inventory draws, which are approaching 75 million barrels since March, plus another 15 million in the U.S. Strategic Petroleum Reserve.

"It continues to wait to see more confirmation from around the world that inventories are indeed declining," Lipow said.

Harvey, formerly a tropical storm, has regenerated into a tropical depression and could strengthen further into a hurricane on Friday, the National Hurricane Center said.

The system is located about 470 miles (755 km) southeast of Port Mansfield, Texas with maximum sustained winds OF 35 miles-per-hour (55 km/h), the NHC said.

Production from Libya's Sharara oilfield, the conflict-riven country's largest, has been seesawing. The field remained shut on Wednesday, two Libyan oil sources told Reuters. The field had restarted at least once on Tuesday amid conflicting reports about whether it had reopened.

"(The) flood of news reports makes it clear that the situation in Libya is still chaotic and that conditions in the country are still far from normal," Commerzbank analysts wrote.

Sharara recently reached output of 280,000 barrels per day (bpd), but closed earlier this week due to a pipeline blockade. Its production is key to Libya's oil output, which surged above 1 million bpd in late June, about four times its level last summer.

Crude Realities:  What could put pressure on oil prices in the weeks ahead
Crude Realities: What could put pressure on oil prices in the weeks ahead

Libya's rising output is a headache for the Organization of the Petroleum Exporting Countries (OPEC), which together with non-OPEC producers including Russia has pledged to hold back around 1.8 million bpd of supplies between January this year and March 2018 to tighten supplies.

However, OPEC has so far fallen short of its pledge, in part due to Libya's strong output. The OPEC-member has been exempt from cuts.

"Sentiment towards oil remains bearish amid oversupply fears and the possible threat of OPEC's supply cut deal falling apart," said Lukman Otunuga, analyst at futures brokerage FXTM.

The next meeting of a ministerial committee of OPEC and non-OPEC states to discuss their production pact has been proposed for Sept. 22.

— CNBC's Tom DiChristopher contributed to this story.