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US crude jumps 1.3%, settling at $56.69, on threatened strike in Nigeria, short covering

Key Points
  • Oil prices were slightly higher on Thursday after falling in the previous session.
  • U.S. crude oil stockpiles fell by 5.6 million barrels in the week to Dec. 1, to 448.1 million barrels, putting stocks below seasonal levels in 2015 and 2016.
  • The fall was countered by soaring output and an unexpectedly large rise in fuel inventories.
Oil jack pumps in the Kern River oil field in Bakersfield, California.
Jonathan Alcorn | Reuters

Oil prices climbed more than 1 percent on Thursday due to a threatened strike in Nigeria and as traders covered shorts after sharp losses the previous day.

One of Nigeria's main oil unions threatened to go on strike from Dec. 18 over what it said was a "mass sacking of workers." The country is Africa's top oil exporter.

"Short covering in the market, together with the threat of a strike by Nigeria's key oil union, has provided some support to oil prices in today's session," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.

U.S. West Texas Intermediate (WTI) crude futures ended Thursday's session 73 cents, or 1.3 percent, higher at $56.69 a barrel. Brent crude futures, the international benchmark for oil prices, were up 88 cents, or 1.4 percent, at $62.10 a barrel at 2:27 p.m. ET (1927 GMT).

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The previous day, Brent had settled 2.6 percent lower, and WTI was 3 percent lower, after an unexpected rise in U.S. fuel stocks.

Data from the Energy Information Administration (EIA) on Wednesday showed that U.S. crude oil inventories fell by 5.6 million barrels in the week to Dec. 1, to 448.1 million barrels, putting stocks below seasonal levels in 2015 and 2016.

But gasoline stocks rose by 6.8 million barrels, well above the 1.7 million-barrel gain analyst had expected, and distillate stocks, which include diesel and heating oil, rose 1.7 million barrels.

"It was a sharp correction yesterday, so it's a bit of a pause today," said Olivier Jakob, managing director of PetroMatrix, adding "technically, it's still very weak."

PVM Oil Associates also said in a note that "the weekly data was not as bad as it seems at first sight."

"Current (stock) levels are nearly 7 percent below last year and the surplus to the five-year average is only 3.9 percent," it said.

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But troublingly for oil bulls, weekly U.S. oil production rose by 25,000 barrels per day (bpd) to 9.71 million bpd, the highest since monthly figures showing the United States produced more than 10 million bpd in the early 1970s.

Soaring U.S. output threatens to undermine efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to bring production and demand into balance following years of oversupply.

Sukrit Vijayakar, managing director of energy consultancy Trifecta warned there were "darker shadows over the pace of rebalancing, if at all any is taking place."