Oil surged over 2 percent on Thursday, approaching its record high after a surprise decline in US inventories stoked concerns about supplies in the world's top consumer ahead of winter. US crude oil stocks fell 1.7 million barrels last week to the lowest level since January.
A report by the Energy Information Administration showed, countering analyst expectations for a 900,000 barrel rise. The drop helped push US oil futures up $1.78 to settle at $83.08 a barrel. US oil had traded up to $83.76 earlier, near the all-time high of $83.90 struck on September 20. London Brent crude rose $1.55 to $80.15 a barrel.
"The EIA data is basically supportive. The drop in crude stocks was caused by a big drop in imports and that could have led to the bigger-than-expected drawdown," said Phil Flynn, analyst for Alaron Trading.
US distillate supplies fell by 600,000 barrels last week, according to the EIA, while heating oil stocks rose 1 million barrels. Gasoline stocks rose 1.7 million barrels. Concerns of a winter shortfall have helped fuel oil's rally over the past month and sent US heating oil prices to a record high on Thursday. "There is a broad consensus that supplies will get tighter this winter," the International Energy Agency said in its monthly report.
The IEA added that high oil prices were tempting consumers to switch to cheaper natural gas and cutting estimates for economic growth. The agency slashed its fourth-quarter demand estimate by 320,000 barrels per day to 2.03 million bpd.
The weakening US dollar has also helped push oil and commodity prices higher over the past month. Gold and platinum reached fresh highs on Thursday as the greenback weakened against the euro.
"The fall of the dollar is a prime mover in this crude and distillate rally," said Andy Lebow, broker a MF Global in New York. "The dollar's fall is encouraging investors to put their money in alternative investments, including commodities."
The decision by the Organisation of Petroleum Exporting Countries to add 500,000 barrels per day of crude to the market starting in November has not cooled prices. Top exporter Saudi Arabia told Asian customers on Thursday it would increase shipments by about 10 percent.
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