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Oil near eight-week high with US stockpiles at six-month low

London - Oil traded near an eight-week high above $48 a barrel in New York after US crude stockpiles shrank to the lowest level since the start of the year.

Futures retreated 0.5% in New York after climbing 1.8% on Wednesday. American inventories declined by 7.21 million barrels last week to the lowest level since January 6, according to an Energy Information Administration report. Kuwait agreed to trim sales volumes of oil for 2017, joining the UAE in promising to pump less after Saudi Arabia called on OPEC producers to cut more.

Oil slid in late May amid concern rising global output will offset reduced flows from members of the Organisation of Petroleum Exporting Countries and its allies including Russia. While prices have risen as US crude stockpiles continued to decline during a period of strong seasonal demand, nationwide inventories remain almost 100 million barrels above the five-year average.

“We will get inventory draws during the summer that are supportive of firmer prices,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.

“But gains are capped for two key reasons. The first is the basic truth of supply growth elsewhere - US shale, Libya and Nigeria - and the second the strong propensity of US shale to hedge as oil prices near $50.”

West Texas Intermediate for September delivery was 26 cents lower at $48.49 a barrel on the New York Mercantile Exchange at 14:42. Total volume traded was about 21% below the 100-day average. Prices gained 86c to $48.75 on Wednesday, the highest closing level since May 30.

Brent for September settlement fell 22c to $50.75 a barrel on the London-based ICE Futures Europe exchange. Prices gained 1.5% to $50.97 on Wednesday. The global benchmark traded at a premium of $2.25 to WTI.

US inventories fell to 483.4 million barrels, more than the median 3 million barrel drop expected in a Bloomberg analyst survey. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, also slipped for a 10th week, according to the EIA data.

Oil-market news:

European oil majors showed they are leaving the biggest downturn in a generation behind with their best performance since prices plunged three years ago.

US crude production dropped by 19 000 barrels a day, slipping for the first time in four weeks. However, production only declined in Alaska while output from the lower-48 states jumped for a fourth week to the highest level since July 2015.

Efforts to resolve the standoff between Qatar and a Saudi-led alliance have reached an impasse, according to a Gulf official with direct knowledge of the matter. Suspected Boko Haram militants ambushed an exploration team working for the Nigerian National Petroleum, killing 10 people, the Nigerian army said.

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