Oil prices climbed more than 1 percent on Thursday due to a threatened strike in Nigeria and as traders cover shorts after sharp losses the previous day brought on by an unexpectedly large rise in US stocks of refined fuels. "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.
One of Nigeria's two main oil unions threatened to launch a nationwide strike from Dec. 18 over what it said was a "mass sacking of workers that joined the union." The country is Africa's top oil exporter. Brent futures rose 98 cents, or 1.6 percent, to settle at $62.20 a barrel, while US West Texas Intermediate (WTI) crude gained 73 cents, or 1.3 percent, to settle at $56.69.
The previous day, Brent settled down 2.6 percent and WTI down 2.9 percent after an unexpected rise in US fuel stocks. Data from the Energy Information Administration (EIA) on Wednesday showed that US 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. But troublingly for oil bulls, US oil production rose by 25,000 barrels per day (bpd) to 9.71 million bpd in the week to Dec. 1, the highest since monthly figures showing the United States produced more than 10 million bpd in the early 1970s.
Soaring US 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, said there were "darker shadows over the pace of rebalancing, if ... any is taking place."