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By Henning Gloystein
SINGAPORE (Reuters) – Oil prices extended gains in early trading in Asia on Wednesday after U.S. prices were boosted by a stockpile draw, while a warning by OPEC producer Iraq that it may slow spending on new fields pushed up international crude contracts.
U.S. crude futures rose after industry group the American Petroleum Institute (API) reported a 3.1 million-barrel crude drawdown last week, versus analyst expectations for a build. A surge in American gasoline prices was also supportive.
Outside the United States, international crude contracts rose on reports that Iraq has told foreign companies developing the country’s southern oilfields that they may need to slash development spending next year because it has less money to pay them due to a slump in crude prices.
Front-month U.S. West Texas Intermediate (WTI) crude futures (CLc1) were trading at $ 45.01 per barrel at 0109 GMT on Wednesday, up 42 cents from their last settlement. Internationally traded Brent futures (LCOc1) were up 18 cents at $ 47.93 a barrel.
Despite the potential cut in Iraq’s oil spending, analysts said it would not immediately affect output from the second biggest producer in the Organization of the Petroleum Exporting Countries (OPEC).
“Iraq’s government has asked oil companies to reduce their 2016 spending plans, citing lower oil prices and falling government revenue. However the reduced budgets are not likely to affect 2015 production, hence may not provide any immediate relief to prices,” ANZ bank said on Wednesday.
With U.S. crude prices receiving more support over the past weeks than international Brent contracts, their discount to Brent has narrowed by over 60 percent since mid-August to around $ 2.50 per barrel, close to 2015 lows.
Oil markets will be keeping a close eye on Washington policy makers in the next two days as the U.S. Fed begins a two-day session to decide whether it will raise interest rates for the first time in almost a decade.
Higher U.S. interest rates would likely attract cash from money traders, lifting the dollar. This in turn is seen as a bearish signal for oil as it makes fuel more expensive for importers who use other currencies as crude is traded in dollar.
(Editing by Richard Pullin)
