By Adedapo Adesanya
Oil prices climbed by about 2 per cent on Wednesday after a drop in US crude stockpiles and a weaker US Dollar overshadowed signs of lower economic growth in China, with Brent futures rising by $1.35 or 1.6 per cent to $85.08 a barrel and the US West Texas Intermediate (WTI) crude up $2.09 or 2.6 per cent to $82.85 per barrel.
The US Energy Information Administration (EIA) reported an inventory draw of 4.9 million barrels for the week to July 12 compared with the draw of 3.4 million barrels for the previous week.
This was largely in line with the estimates provided by the American Petroleum Institute, which reported on Tuesday an inventory draw of 4.44 million barrels for the week to July 12 in the throes of the high-demand season.
Crude oil inventories in the world’s largest oil producer are now roughly 5 per cent below the five-year average for this time of year.
The EIA reported mixed changes in fuel inventories for the week to July 12.
In gasoline (petrol), the agency estimated an inventory increased by 3.3 million barrels in the week ending July 12, with production at 9.5 million barrels daily. Gasoline inventories are now slightly over the five-year average for this time of year.
This week’s figures compared with an inventory decline of 2 million barrels in the week prior, when production of gasoline averaged 10.3 million barrels daily.
Support also came from a weaker US Dollar after the dollar hit a 17-week low against a basket of major currencies.
A weaker greenback boosts demand for oil by making greenback-denominated commodities like oil cheaper for holders of other currencies.
Meanwhile, worries remain as China, the world’s top oil importer, saw its economy grow 4.7 per cent in the second quarter, official data showed earlier this week, the slowest growth since the first quarter of 2023, capping crude price gains.
However, there are expectations that interest rate cuts may happen in top economies including the US as top officials from its central bank, the Federal Reserve officials said on Wednesday that it is closer to cutting interest rates as indicators like inflation and jobs are improving.
The nearest target has been put in September.
The Federal Reserve hiked rates aggressively in 2022 and 2023 to tame a surge in inflation. Borrowing costs rose for consumers and businesses, slowing economic growth and reducing oil demand. Lower interest rates could boost oil demand.