Oil up four percent on US crude draw; Brent back above $50

Oil prices surged 4 percent on Wednesday, with Brent settling above the psychological $50 a barrel mark, after a larger-than-expected drawdown in US crude inventories. It was a second straight day of gains for oil, which has risen nearly 8 percent since Monday's settlement to recover almost all of what it lost after Britain's shock vote to exit the European Union.
Fading concerns over the so-called Brexit, potential for an oil workers' strike in Norway and a crisis in Venezuela's energy sector were among factors supporting Wednesday's rally. While spot contracts in Brent and US crude surged, the premium for longer-dated oil spiked too as traders bet crude in storage will fetch better prices in coming months.
The US Energy Information Administration reported that crude stockpiles fell 4.1 million barrels in the week to June 24, the sixth consecutive week of drawdowns. That was more than the 2.4 million barrels expected by analysts in a Reuters poll. Brent crude futures settled up $2.03, or 4.2 percent, at $50.61 per barrel. It hit a near one-week high of $50.74 during the session.
US crude's West Texas Intermediate (WTI) futures also closed up $2.03, or 4.2 percent, at $49.88. WTI's session high was $50. "Aside from improving market fundamentals, bulls are also eager to keep prices at around $50 as we begin the second half," said John Kilduff, partner at New York energy hedge fund Again Capital. Among longer-dated oil futures, the discount for December WTI versus December 2017 held near the almost three month high above $2.40 a barrel seen on Tuesday.
"We played on that curve to widen out and it was good for us," said Tariq Zahir, crude spreads trader for Tyche Capital Advisors in New York. The discount in nearby oil versus forward, known as contango, has widened as traders took advantage of cheap freight to store oil on tankers on expectations of further price gains by 2017 as a crude glut abates. Despite that, some were bearish on their longer-term view of oil as the EIA also reported an unseasonably large rise of 1.4 million barrels in gasoline stockpiles versus analysts' expectations for a 58,000-barrel draw.
On the East Coast, gasoline stockpiles rose to record levels. "I am still unimpressed with overall crude draws for June," said Scott Shelton, energy futures broker with ICAP in Durham, North Carolina. "With 16.7 million barrels per day of crude runs and production declines, we should have larger drawdowns for Q2. That has simply not happened."