Oil Prices Rise As API Reports Huge Crude Inventory Draw

Oil Prices Rise As API Reports Huge Crude Inventory Draw

"We're on the precipice of a large sell-off", he said.

Official U.S. data is released late Wednesday morning.

Traders are also watching USA shale production, which is trudging on full steam ahead despite oil prices, which have been unable to hold above $50 for any significant length of time.

Analysts polled by Reuters forecast that data would show US crude stockpiles fell for a seventh consecutive week, along with a probable drop in distillate and gasoline inventories.

Futures slid 0.6 percent in NY after losing 2.5 percent Monday, the biggest drop in more than five weeks.

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The American Petroleum Institute (API) reported a major draw of 9.2 million barrels in United States crude oil inventories-the biggest draw since September 2016.

That compared with analyst expectations for a decrease of 3.1-million barrels.

West Texas Intermediate for September delivery declined 38 cents to $47.21/bbl at 10:06 a.m. on the New York Mercantile Exchange.

"The market took this as a mildly bullish report", said William O'Loughlin, investment analyst at Rivkin Securities. While that narrowed the surplus, stockpiles were still 219 million barrels above the five-year average at the end of June, the agency said.

"A mere supply cut is not going to boost prices", said Sukrit Vijayakar, director of energy consultancy Trifecta.

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Against the Swiss franc EURCHF=EBS, it fared slightly better and was broadly flat on the day at 1.1319 francs per euro. SPDR Gold Shares GLD , the iShares Gold Trust ETF IAU , and the VanEck Vectors Gold Miners ETF GDX all rose over 1%.

The recent OPEC/non-OPEC capacity cuts have meant that India has had to diversify its crude suppliers, with state-run refiners making purchases of USA crude grades.

Oil extended its decline after the USA forecast record shale output next month and the International Energy Agency said OPEC producers face a long battle with American rivals.

The Organization of the Petroleum Exporting Countries together with non-OPEC producers like Russian Federation has pledged to restrict output by 1.8 bpd between January this year and March 2018.

Offsetting much of that effort, however, US oil production has soared by nearly 12 percent since mid-2016 to 9.42 million bpd. Flynn also noted that "shale producers will continue to struggle" as oil stays below $50 a barrel.

Ed Morse, global head of commodities research at Citigroup, told Bloomberg, "The OPEC position even with Russian Federation is really not sustainable overt a long period of time, they're losing revenue by doing what they've done", and the US producers "can survive at a lower price".

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