Oil prices jump over $2 after drawdown in U.S. stocks

© Reuters. FILE PHOTO: A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

By Noah Browning

LONDON (Reuters) -Oil prices rose over $2 on Wednesday after industry data showed a larger-than-expected drawdown in U.S. crude inventories and on expectations demand will rise as vaccination roll-outs widen.

Brent oil rose $2.25, or 3.1%, to $75.85 a barrel by 1355 GMT, while U.S. West Texas Intermediate (WTI) crude climbed $2.31, or 3.3%, to $72.77 a barrel.

Brent hit its highest levels since late July and WTI since early August.

U.S. crude oil, gasoline and distillate stocks fell last week, two market sources said, citing American Petroleum Institute figures, after Hurricane Ida shut numerous refineries and offshore drilling production. [API/S]

Crude stocks fell by 5.4 million barrels for the week ending Sept. 10, compared to a forecast 3.5 million barrel drop.

The U.S. Energy Information Administration's oil inventory report is due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

"The impact of Hurricane Ida was a lot greater than many anticipated and production in the Gulf of Mexico region might struggle to return until Tropical Storm Nicholas is done punishing the region with torrential rain," said Edward Moya, senior analyst at OANDA.

Tropical Storm Nicholas moved slowly through the Gulf Coast on Tuesday, leaving hundreds of thousands of homes and businesses without power, although Texas refineries ran normally.

Damage from the storm comes two weeks after Hurricane Ida knocked a significant amount of Gulf Coast refining capacity offline.

"This year’s hurricane season has a much greater and longer-lasting impact on the global oil balance than in previous years," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.

Oil prices also found support from the International Energy Agency (IEA), which said on Tuesday vaccine roll-outs would power a rebound, after a three-month slide in global oil demand due to the spread of the Delta coronavirus variant and renewed pandemic restrictions.

But oil price gains were capped by a fall in China's crude throughput in August with daily refinery runs hitting the lowest since May 2020 and overall factory output faltering.