Oil prices shoot higher on hopes U.S. supply data will reveal a drawdown

London (Aug 3)  Oil prices rallied on Wednesday on hopes U.S. data will show a drawdown in stockpiles, though a global supply glut was keeping prices close to three-month lows.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU6, +0.94%  rallied 37 cents, or 0.9%, to $39.88 a barrel. On Tuesday, the benchmark finished below $40 a barrel for the first time since early April.

October Brent crude LCOV6, +0.86%  on London’s ICE Futures exchange rose 35 cents, or 0.8%, to $42.15 a barrel on Wednesday.

Week to date, U.S. oil prices have fallen 4.2%, as domestic stocks of gasoline have been unusually high for this time of the year. Last week, the U.S. Energy Information Administration reported that at 241 million barrels, gasoline inventories were “well above the upper limit of the average range.”

Traders and analysts will be monitoring this week’s U.S. Department of Energy data slated for release later Wednesday. Based on estimates by industry group American Petroleum Institute, U.S. crude supplies decreased 1.3 million barrels in the week ended July 29. Gasoline stocks decreased 450,000 barrels, while distillate stocks expanded by 539,000, according to the estimates.

A Wall Street Journal survey of analysts showed crude stocks were projected to decline by 900,000 barrels on average. Gasoline stockpiles are expected to show a decrease of 300,000 barrels. Stocks of distillates, which include heating oil and diesel, are expected to fall by 100,000 barrels.

Despite the anticipated fall in U.S. crude stockpiles, many market watchers said the pace of decline wasn’t quick enough to match the rate of production. Prices of U.S.-traded oil could sink to $35, as the recent rally has encouraged some drillers to return to the fields, they said.

“Our impression of the overall API figures for last week is that the swings are likely too small to put prices onto a different, more bullish path,” said Tim Evans, a Citi Futures analyst.

The anticipated production pickups in Nigeria and Libya, where politically related supply disruptions are being resolved, will also keep the world swamped in surplus barrels.

Nymex reformulated gasoline blendstock for September RBU6, +0.02%  — the benchmark gasoline contract — rose 0.1% to $1.31 a gallon..

Natural gas for September NGU16, +0.37%  rose 0.2% to $2.74 per million British thermal units.

Source: MarketWatch