Oil prices climb on eighth straight week of US stockpile drawdowns

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Opec's deal to cut production to cut the global supply glut appears to be working (Source: Getty)

Oil prices rose today after official US data showed a decline in crude inventories for the eighth straight week.

Brent crude, the global benchmark, lifted 0.89 per cent to $52.33 a barrel while US benchmark West Texas Intermediate (WTI) futures increased 0.86 per cent to $48.24 a barrel.

Data from the Energy Information Administration (EIA) said US crude inventories fell 3.3m barrels last week, slightly missing analysts’ expectations of 3.5m barrels. Gasoline inventories also dropped by 1.22m barrels, which beat traders' expectations.

Oil had been trading lower earlier in the day following reports Libya had resumed production at its largest oilfield, Sharara.

Crude prices have been helped higher by the Organisation of the Petroleum Exporting Countries' (Opec) deal with non-members to cut production by 1.8m barrels per day until March 2018 in an effort to rebalance the market.

"While prices are still low, they have rebounded from early $40s to early $50s currently. This was only possible because there was a sense of order brought into the market by Opec," Mihir Kapadia, chief executive and founder of Sun Global Investments, told City A.M.

"Had there not been such a measure, we could have seen the haphazard production leading to a massive glut and plunging the commodity below $30."

Kapaida added:

The commodity is still under extreme pressure in the short term due to the oversupply in the market.

Outside of the Opec, the US has been the largest contributor to the friction, as its increased production is now finding its way to newer customers in Asia including India, South Korea, Japan, China, Thailand, Australia and Taiwan.

Read more: Oil prices edge down following rising Opec exports and strong US output

Tags: Oil prices