Oil prices rise on bigger-than-expected draw in US inventories

July 18, 2024 02:18 PM AEST | By Investing

Oil prices rise on bigger-than-expected draw in US inventories

US inventories see sustained draws

Official data from the Energy Information Administration showed U.S. oil inventories shrank by nearly 4.9 million barrels, compared to expectations for a 0.9 million barrels.

The data showed U.S. inventories clocking a third straight week, as demand in the world’s biggest fuel importer appeared to be picking up with the travel-heavy summer season.

But the weekly inventory draw was muddled by builds in distillates and gasoline inventories, which indicated that demand might be slowing after an initial boost from the Independence Day week.

Fed easing hopes boost crude, dent dollar

Oil was also buoyed by the increasing prospect of an interest rate cut by the Federal Reserve, which battered the dollar in recent sessions.

Soft inflation readings and dovish-leaning comments from Fed officials saw traders ramp up bets that the central bank will begin cutting rates by as soon as September.

Lower rates present a stronger outlook for economic growth, which fosters oil demand. They also weigh on the dollar, which helps oil demand by making crude cheaper for international markets.

China concerns remain in play

But bigger gains in crude were held back by persistent concerns over China, as recent data showed that economic growth in the world’s biggest oil importer slowed in the second quarter.

Concerns over increased trade tensions with the U.S. also grew after a Bloomberg report said the U.S. government was considering stricter restrictions on China’s technology and chipmaking sectors.

Such a move could draw ire from Beijing, sparking a renewed trade war between the two countries.

This article first appeared in Investing.com

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