LONDON – Oil prices jumped on Thursday after the U.S. government said that crude stocks fell to a fresh five-month low last week, as refineries worked hard to meet demand.
U.S. light crude rose $1.84 to settle at $44.61 a barrel on the New York Mercantile Exchange (search), down from last month's record high at $49.40, but still up around 35 percent since the start of the year. London Brent crude rose $1.83 to end at $42.20 a barrel.
Prices rose after the U.S. Energy Information Administration (search) said commercial crude oil stocks in the United States fell by 1.4 million barrels last week to 285.7 million.
Stocks have fallen around 19 million barrels, or more than 6 percent, in the last two months and are at the lowest level since March.
Gasoline stocks fell by 2.5 million barrels to 204.1 million, while distillate stocks, rose by just 200,000 barrels to 126.6 million, the EIA said. Refineries were working at 96.5 percent of capacity.
"Distillate inventories were up slightly but are not rising at a normal pace, so that is a little bit concerning," said Kyle Cooper, energy analyst at Citigroup Global Markets.
The International Energy Agency (search) said earlier that oil stocks in industrialized nations will build in coming months unless OPEC (search) producers pull back from a production surge that is replenishing world inventories.
"What is clear for now is that supply is running ahead of demand and stocks are building," the IEA said in its monthly Oil Market Report. "While demand is rising, so too is global supply."
Total OPEC production has risen by 1.5 million bpd over the last four months. Top OPEC producer Saudi Arabia pushed production to around 9.5 million bpd in August, up more than one million bpd since April.
If OPEC production continued at current levels it would imply a one million bpd stock build compared to last year when stocks were unchanged in the fourth quarter.
OPEC, which controls about half of global crude exports, will meet on Sept. 15 in Vienna to review output policy.
A top Iranian oil official said on Thursday that the group is united on the need to raise its oil price target by five dollars to an average $30 a barrel, but the cartel has yet to agree on when to implement the higher level.
"There is a consensus in OPEC for the need for an upward revision of the price band to the mean of $30," Iran's OPEC governor Hossein Kazempour Ardebili said. "But the members have different views about the timing of the implementation."
Indonesian Oil Minister Purnomo Yusgiantoro said earlier that Jakarta also favored a $30 mid-point for the target price band, which currently stands at $22 to $28 a barrel.
OPEC's reference price has been above the upper $28 limit since late last year as oil has surged on soaring demand and tightly stretched supplies.
Dealers were watching the path of Hurricane Ivan, which disrupted oil refineries and shipping as it ripped through the Caribbean on Wednesday.
The storm's course may take it into the energy-rich Gulf of Mexico, home to about a quarter of U.S. oil and gas production.