Oil jumps on steep drop in US crude stocks

Oil prices rose nearly 1 per cent on Wednesday, extending overnight gains, after industry data estimated US crude stockpiles fell much more than expected last week reinforcing bullish views on fuel demand in the world's largest economy.

US West Texas Intermediate (WTI) crude futures leapt 60 cents, or 0.9 per cent, to $66.29 a barrel at 7 am, after climbing to $66.45, its highest since March 8.

Brent crude futures jumped 58 cents, or 0.8 per cent, to $69.46 barrel after touching a more than seven-week high of $69.64.

Both benchmark contracts rose nearly 2 per cent on Tuesday ahead of data from the American Petroleum Institute industry group.

API figures showed crude stocks fell by 7.7 million barrels in the week ended April 30, according to two market sources. That was more than triple the drawdown expected by analysts polled by Reuters.

"This should provide some further immediate upside momentum for the market," ING Economics analysts said in a note.

Traders are awaiting data from the US Energy Information Administration due at 10:30 a.m. EDT (1430 GMT) on Wednesday to see if official data shows such a large drawdown.

"If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January," Commonwealth Bank analyst Vivek Dhar said in a note.

The rise in oil prices to nearly two-month highs has been supported by Covid-19 vaccine rollouts in the United States and Europe paving the way for pandemic lockdowns to be lifted and air travel to pick up.

So far that has more than offset a drop in fuel demand in India, which is battling a surge in infections.

"However, if we were to eventually see a national lockdown imposed, this would likely hit sentiment," ING analysts said of the situation in India.