Oil prices above $50, buoyed by US stock draw

A stronger dollar makes oil more expensive because it raises the cost for imports for most of the world's countries

Oil prices rose in early Asian trading on Wednesday, with US crude joining Brent above $50 a barrel after data from the American Petroleum Institute (API) showed a larger than expected draw on stocks.

US crude futures' August contract, the new front month from Wednesday, had climbed 9 cents to $49.94 a barrel by 0223 GMT. Earlier it rose to as high as $50.54, marking the first time it had risen above $50 since June 10.

Brent crude futures were up 4 cents at $50.66 a barrel, after settling down 3 cents at $50.62 on Tuesday.

US crude inventories fell by 5.2 million barrels for the week ended June 17, the API said. The trade group's figures were triple the draw of 1.7 million barrels forecast by analysts in a Reuters poll.

The US government's Energy Information Administration will issue official stockpile data on Wednesday.

Markets remain jumpy over the possibility the United Kingdom will vote to leave the European Union on Thursday in a referendum, with polls showing little difference between the "remain" and "leave" camps.

The dollar clung to modest gains early on Wednesday after Federal Reserve Chair Janet Yellen held the line of "gradual increases" in US rates, while sterling's short-covering rally lost momentum a day ahead of the referendum. [FRX]

Japan's Nikkei was down nearly 0.7 per cent in early trading, while gold prices edged lower.

"Strengthening in the dollar and weakness in other currencies would ... be directionally short-term bearish for crude oil" in the event of a British exit, Societe Generale said in a research note.

A stronger dollar makes oil more expensive because it raises the cost for imports for most of the world's countries.

Still, fundamentals could come into play once the dust settles from the vote.

"Global demand growth is quite robust, driven by the US, China, India and other emerging markets," Societe Generale said. "On the supply side, declining US crude production is expected to underpin a trend of lower non-OPEC production."

Photograph: Carlos Garcia Rawlins/Reuters