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Oil nears $50 as traders weigh US stockpile drop, output gain

Hong Kong - Oil traded near $50 a barrel as investors weighed declining US stockpiles against rising output.

Futures added 0.3% in New York, extending their 0.9% gain on Wednesday. US crude inventories dropped by 1.53 million barrels last week, while gasoline supplies fell for a seventh week, according to a report from the Energy Information Administration.

US oil production rose to the highest level since July 2015.

Oil climbed above $50 a barrel this week for the first time since May amid increased confidence that output curbs by the Organisation of Petroleum Exporting Countries (Opec) and its allies are rebalancing the market.

There are also signs of a pickup in fuel demand, with US gasoline consumption surging to a record 9.84 million barrels a day last week.

“Optimism about another weekly contraction in US stocks of crude and oil products has been followed by concerns about higher domestic output," said Daniela Corsini, a commodity economist at Intesa Sanpaolo SpA in Milan.

West Texas Intermediate for September delivery was at $49.74 a barrel on the New York Mercantile Exchange, up 15 cents, at 10:19am London time. Total volume traded was about 27% above the 100-day average. The contract advanced 43 cents to $49.59 on Wednesday.

Brent for October settlement rose 16 cents to $52.52 a barrel on the London-based ICE Futures Europe exchange, after adding 58 cents on Wednesday. The global benchmark crude traded at a premium of $2.68 to October-delivery WTI.

US crude output increased by 20,000 barrels a day to 9.43 million a day, according to Wednesday’s report from the EIA. The 1.53 million-barrel decline in crude inventories was about half the amount analysts had predicted in a Bloomberg survey.

Gasoline stockpiles fell by 2.52 million barrels to 227.7 million, the lowest level since December.

Oil-market news:

US shale producers seem to be hedging again as demand for the contracts that guarantee price levels soared after 2018 WTI crude returned to $50 a barrel.

"More hedging activity from North American producers increases the risk of high non-Opec supplies next year," Corsini said.

Electric vehicles are not a threat to oil prices to 2022, DNB Bank said in a note. Finland’s Neste Oyj will shut its Porvoo diesel line for four weeks in October.

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