Oil prices up on U. S. inventory draw, but traders warn on premature rally

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Source:   —  April 07, 2016, at 4:24 AM

International Brent futures LCOc1 traded over per barrel in early trading and stood at $40.07 at thirty-eighth GMT, up twenty-three cents from the latest near and almost eight % over lows reached earlier this week.

Crude futures were lifted by a raft of supportive indicators in early trading on Thursday, although some traders warned that physical supply and demand fundamentals didn't warrant a powerful price recovery at this stage.

International Brent futures LCOc1 traded over per barrel in early trading and stood at $40.07 at thirty-eighth GMT, up twenty-three cents from the latest near and almost eight % over lows reached earlier this week.

Front mo U. S. W TX Intermediate (WTI) crude futures CLc1 were trading at $38.09 per barrel, up thirty-four cents from their latest near and eight % over their April lows.

U. S. crude prices were supported by an unexpected fall in crude inventories, albeit from all-time record highs, latest week as refineries continued to hike output and imports fell.

"Oil prices spiked after the EIA data release," ANZ bank said in a morning note on Thursday.

U. S. crude inventories USOILC=ECI fell 4.9 million barrels in the week to April one, compared with analysts' expectations for an expand of 3.2 million barrels, according to data from the Energy Information Administration on Wednesday.

In Europe, N Sea oil field maintenance expected following mo lent support to Brent futures, which are priced off N Sea supplies.

And on the demand side, manufacturing seems to be recovering from recent weakness, analysts said.

"Global manufacturing PMIs (Purchasing Managers' Index) saw their strongest MoM (month-on-month) recovery in two and half years in March, according to our calculations," Macquarie bank said.

Yet some traders warned that the rise in futures prices might be premature and not supported by physical market fundamentals.

A planned meeting of major oil producers on April seventeen to freeze output around current levels, which in most cases remains at or close record highs, would do small to reduce an overhang in production with at minimum a million barrels of crude pumped every day in excess of demand.

"Absent a tightening in global oil fundamentals we reiterate our recommendation to go long keep spread," BNP Paribas said.

A keep is a financial instrument that gives a trader the option right to sell an asset love crude futures.

(Editing by Ed Davies)

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