* U.S. crude stocks slump to lowest since October
* New Permian Basin pipelines add demand at WTI delivery hub
* Hurricane Dorian threatens Gulf of Mexico output
* Graphic on U.S. petroleum stocks: https://tmsnrt.rs/2XkQF8e
(New throughout, updates prices, market activity and comments)
By Collin Eaton
HOUSTON, Aug 29 (Reuters) - U.S. oil futures rose 1.7% on
Thursday, lifted by a deep draw on U.S. crude inventories,
especially at the benchmark's delivery hub due to increased
demand with the start-up of two new West Texas pipelines.
The approach of Hurricane Dorian toward Florida also raised
fears that offshore U.S. crude producers may slow output if the
storm passes into the Gulf of Mexico over the weekend, analysts
said.
Meanwhile, international benchmark Brent oil rose above the
$61 a barrel mark as concerns about economic growth eased.
West Texas International (WTI) crude CLc1 settled at
$56.71 a barrel, up 93 cents, or 1.7%. Brent crude LCOc1
settled at $61.08, up 59 cents, or 0.98%.
"There's a storm premium in the WTI price," said Phil Flynn,
an analyst at Price Futures Group in Chicago. "The track of the
storm is kind of dangerous for Gulf of Mexico production."
Dorian is forecast to strengthen and become a highly
dangerous Category 4 hurricane on Sunday, the National Hurricane
Center said. Last month, Hurricane Barry had prompted offshore oil
companies to shut as much as 74% of production, lifting U.S.
crude prices, before it weakened to a tropical storm in
Louisiana.
Government data on Wednesday showed U.S. crude stocks
dropped last week by 10 million barrels to their lowest since
October as imports slowed, while gasoline and distillate stocks
each fell by over 2 million barrels. EIA/S
Inventories at the nation's main delivery hub in Cushing,
Oklahoma, where WTI futures are priced, slumped last week by
nearly 2 million barrels to their lowest since December, the
data showed.
Cushing stocks have dropped by over 300,000 barrels since
the government report, traders said, citing market intelligence
firm Genscape's midweek report.
The drop came after two new pipelines opened in the Permian
Basin this month, flowing crude to the U.S. Gulf Coast and
tightening supplies at Cushing. EPIC Midstream Holdings LLC and Plains All American Pipeline
LP PAA.N both opened new lines from the Permian to Corpus
Christi, Texas, in mid-August. The lines will eventually have a
combined capacity of more than 1 million barrels per day (bpd),
the companies have said.
"The market is bid on filling these lines," said Robert
Yawger, an analyst at Mizuho in New York. "Things have changed
drastically in just two or three weeks. And you're going to have
another big pipeline that's going to continue to change the
math."
Phillips 66 PSX.N expects its 900,000 bpd Gray Oak
pipeline to come into service before the end of the year.
On Wednesday, EPIC proposed to lower transportation rates on
its 400,000 bpd line to $1.35 a barrel from $2.50, effective
Sept. 1, according to U.S. regulatory filings. Cheaper rates
will encourage greater flows to the coast and reduce deliveries
into Cushing, analysts said. As shippers send more Permian crude to the Gulf Coast,
"there's more competition for Cushing barrels," said Andy Lipow,
president of Lipow Oil Associates in Houston. "You'll see a
continued decline in Cushing inventories."
Concerns about a slowdown in economic growth due to the
U.S.-China trade war raging between the world's biggest oil
consumers, along with the potential hit to oil demand, are
keeping prices in check.
China's commerce ministry said on Thursday China and the
United States were discussing the next round of face-to-face
trade talks scheduled for September, but hopes for progress
hinged on whether Washington could create favourable conditions.
Media reports that China will not retaliate anytime soon
against the United States because of new U.S. tariffs "is
tamping down fears of the trade wars," said Gene McGillian, vice
president of market research at Tradition Energy in Stamford,
Connecticut.
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GRAPHIC: U.S. weekly petroleum stocks https://tmsnrt.rs/2XlX17b
CHART: Brent oil may retrace into $59.47-$59.70 range
L3N25P0DF
CHART: U.S. oil may fall into $54.46-$55 range L3N25P0V8
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