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Oil trades higher for third straight day on large US fuel stock draws; Brent at $79/bbl

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Oil prices rose for a third day on Wednesday after U.S. gasoline and distillate stocks fell more than expected, painting a healthy demand picture a day after the U.S. government cut its estimates for output growth.

Brent crude futures rose 45 cents to $79.04 a barrel as of 10:43 a.m. ET (15:43 GMT), while U.S. West Texas Intermediate crude climbed 48 cents to $73.78.

U.S. gasoline stocks fell by 3.15 million barrels last week compared with analysts estimates for a build of 140,000 barrels, according to the U.S. Energy Information Administration (EIA)

Distillate stocks also fell 3.2 million barrels in the week to Feb 2, compared with analysts’ estimates for a fall of 1 million barrels.

Crude stocks, however, posted a larger-than-expected build of 5.5 million barrels as production recovered after a cold snap while US refiners stepped up maintenance.

Analysts had estimated a build of 1.9 million barrels.

“The crude build is mostly the result of low refinery runs – storm and maintenance related, and higher net imports of US crude, but with recovering US oil demand, refined products saw large draws,” UBS analyst Giovanni Staunovo said.

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On Tuesday, U.S. crude stocks fell short of analysts’ forecasts, American Petroleum Institute figures showed.

The EIA cut on Tuesday its 2024 outlook for domestic oil output growth, putting it far lower than last year’s increase and predicting it would not reach December 2023’s record levels until February 2025.

This all strengthened the case that the oil market will be balanced in 2024, analysts at Haitong Futures said in a note, adding that oil prices should remain in a $10 range around current levels.

U.S., Qatari and Egyptian mediators prepared a diplomatic push to bridge differences between Israel and Hamas on a ceasefire plan for Gaza after the Palestinian group responded to a proposal for an extended pause in fighting and hostage releases.

Traders are following the situation in the Middle East, especially Iranian-backed Houthi rebels’ attacks on shipping in the Red Sea that have disrupted traffic through the Suez Canal, the fastest sea route between Asia and Europe and one that carries nearly 12% of global trade.

In the longer term, the International Energy Agency (IEA) said on Wednesday that India is expected to be the largest driver of global oil demand growth between 2023 and 2030, narrowly taking the lead from top importer China.

That comes as struggling large economies, including China’s, dent confidence in the global oil demand outlook.

In Germany, industrial production fell more than expected in December, the federal statistics office said, highlighting weakness in the backbone of Europe’s largest economy.

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