WTI Crude Oil Futures rise after big US inventory drop

Key points

Futures on US West Texas Intermediate Crude Oil surged on Wednesday, while trading near levels last seen in April, after a sharp drop in US crude oil stocks indicated robust fuel demand.

The latest data by the American Petroleum Institute showed crude oil inventories had decreased by 15.4 million barrels in the week ending July 28th. It has been the largest weekly drop since at least 2012. Analysts on average had expected a much smaller decrease – by 0.9 million barrels.

Gasoline stocks decreased by 1.7 million barrels last week, compared with market consensus of a 1.3 million barrel draw.

And, distillate inventories dropped by 510,000 barrels last week, compared with estimates of a 112,000 barrel build.

The official government inventory data will be released later today.

“The seasonal peak demand period (for transportation fuels) and supply cuts by oil producing countries have caused oil prices to rise,” CMC Markets analyst Leon Li was quoted as saying by Reuters.

Oil may continue to gain, but prices may not move above $90 per barrel given recessionary pressures in key markets such as the EU, Li added.

Crude stocks have also started to decrease in other parts of the world, as demand exceeds supply, which has been restrained by significant output cuts by Saudi Arabia.

The latter is expected to extend its voluntary oil production cut of 1 million barrels per day to September at the OPEC+ meeting this Friday.

As of 12:12 GMT on Wednesday WTI Crude Oil Futures for September delivery were gaining 0.74% to trade at $81.97 per barrel.

At the same time, Brent Oil Futures for October delivery were gaining 0.65% on the day to trade at $85.46 per barrel.