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Steep Drop in US Stockpiles Hikes Oil Prices

Oil Prices rose nearly 1% on Wednesday, extending overnight gains, after industry data showed that U.S. crude stockpiles dropped much more than anticipated last week, strengthening bullish views on global fuel demand. The United States of America WTI crude futures jumped 60 cents, or 0.9 percent, to $66.29 a barrel at 0130 GMT, after rising to $66.45, the highest level since March 8.

After hitting a more than seven-week high of $69.64, Brent crude futures rose 58 cents, or 0.8 percent, to $69.46 barrel. Both benchmark contracts gained nearly 2% on Tuesday, ahead of industry data from the American Petroleum Institute. According to two market sources, crude stockpiles dropped by 7.7 million barrels in the week ending April 30. The drop was more than triple what analysts polled by Reuters had predicted.

ING Economics analysts said in a note, “This should provide some further immediate upside momentum for the market.” Traders are waiting for data from the US Energy Information Administration, which is scheduled for release at 10:30 a.m. EDT (1430 GMT) on Wednesday, to see if official data indicates such a significant drop.

COVID-19 vaccine rollouts in the United States and Europe have aided the increase in Oil Prices to nearly two-month highs, opening the way for pandemic lockdowns to be lifted and air travel to resume. So far, this has more than compensated for a decrease in fuel demand in India, which is dealing with an outbreak of infections.

Commonwealth Bank analyst Vivek Dhar said in a note, “If confirmed by the EIA, that would mark the largest weekly fall in the official data since late January.”

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