Oil prices extended gains on Thursday from a larger-than-expected drop in US energy stockpiles and an intense cold snap in the US, the world’s biggest energy consumer.
New York’s main futures contract, light sweet crude for delivery in February, rose US$1.38 to US$78.05.
London’s Brent North Sea crude for February delivery gained US$0.86 to US$76.31.
The Christmas Eve market surge was largely driven by a fall in energy inventories in the US that had been far larger than expected, analysts said.
Data released by the US Department of Energy on Wednesday showed stockpiles of crude dropping by 4.9 million barrels to 327.5 million in the week ending on Friday last week, far above analyst expectations of a 1.1 million-barrel drawback.
Distillate inventories also slid 3.1 million barrels last week, against analyst forecasts of a 1.6 million barrel fall. Data for distillates, which include heating oil, is in focus as winter starts to bite in the US and Europe.
“The weather has gotten colder, there could be another large draw next week, so you’re starting to get a situation where the market could be tightening quickly,” independent analyst Ellis Eckland said.
Some analysts cautioned that despite the fall in stockpiles, inventory levels were still high.
“Crude oil stocks are still lingering near the upper end of the five-year range, thus creating doubt in our mind as to the underlying strength of the recent price rally,” MF Global analyst Tom Pawlicki said.
Oil prices have meanwhile risen for much of the week as traders bet on improving demand after OPEC decided against changing the cartel’s official crude output levels.
OPEC, as expected, held its crude output quotas unchanged at its meeting in Angola on Tuesday, warning of lingering weakness in the world economy. Tuesday’s meeting capped a year of recovery for oil prices, which have more than doubled since the cartel set strict quota cuts in the depths of the economic crisis a year ago.
In January, the cartel enforced total OPEC cuts of 4.2 million barrels a day, which helped prices recover from around US$32 one year ago.
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