Oil prices jump more than 2% on sharp drop in U.S. crude inventories

New York — Oil prices gained more than 2% on Wednesday after data showing a fall in U.S. crude stockpiles helped ease worries about weakening oil demand caused by the China-U.S. trade war.

Brent crude futures were up $1.33, or 2.2% to $60.84 a barrel by 10:55 a.m. EDT (1455 GMT). WTI crude futures rose $1.42, or 2.6%, to $56.35 a barrel.

Although the two benchmarks recorded their biggest daily gains in eleven sessions on Wednesday, they are headed for monthly losses of around 7% and 4%, respectively, weighed down by trade barriers between the world’s two biggest oil consumers.

U.S. crude oil inventories fell last week by 10 million barrels, compared with analysts’ expectations for a decrease of 2.1 million barrels, as imports slowed, the Energy Information Administration said.

Gasoline stocks fell by 2.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 388,000-barrel drop.

“It was an incredibly bullish report, one of the more bullish we’ve had in a while, with draws across the board and of course the massive crude oil drop, which was generated by another drop in imports,” said John Kilduff, a partner at Again Capital in New York. That draw down was likely due to a drop in Saudi exports to the U.S, Kilduff said.

U.S. President Donald Trump said on Monday that he believed China was sincere about wanting to reach a trade deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through “calm” negotiations.

On Tuesday, however, concerns resurfaced after China’s foreign ministry said it had not heard of any recent telephone call between the United States and China on trade, and that it hoped Washington could create conditions for talks.

Crude prices have fallen about a fifth from 2019 highs hit in April, partly because of worries that the trade war is hurting the global economy and could dent oil demand.

Morgan Stanley on Wednesday lowered its price outlook for the rest of the year for Brent to around $60 per barrel from $65 and for U.S. crude to $55 per barrel from $58 as it downgraded its demand growth forecast for this year and next.