US Oil Inventory Supports A Price Rally

Crude and Brent both rallied today as a surprising drop in US weekly inventories gave big players reason to push markets. There has been no other affirmative data from oil as Brexit fears re-entered the marketplace. The US dollar reversed most of its losses as the day wore on while gold rallied over $10.

Crude oil gained $1.33 immediately after the inventory release to trade at 49.17 while Brent oil gained $1.38 to 50.63.

 

Britain’s vote to leave the bloc could also drag on the US economy at a time when momentum in the country’s job market may already by slowing, Federal Reserve governor Jerome Powell said on Tuesday. Markets will continue to monitor US economic data for clues on the timing of the next rise in US interest rates, with the nonfarm payrolls number scheduled for July 8.

Data on Wednesday showed moderate growth in consumer spending in May.

“The uncertainty around Britain’s vote has taken centre stage and unless US payrolls data comes up much higher than expected, I doubt it will change the Federal Reserve’s timing of rate increases,” said Commerzbank analyst Carsten Fritsch.

European Central Bank (ECB) boss Mario Draghi said central banks should aim to align monetary policies to mitigate “destabilizing spillovers.” European leaders who gathered in Brussels for a two-day meeting urged Britain to act quickly to resolve the political and economic mayhem unleashed by the vote.

Analysts said crude prices were also supported by worries about a potential strike in Norway’s oil industry, which could affect almost a fifth of the country’s output.

And a slight weakening of the greenback, as traders shift out of safe haven investments, also helped as it made dollar-priced crude less expensive for buyers holding other currencies, in turn boosting demand.

Oil prices jumped more than 2 percent on Wednesday after the U.S. government reported a larger-than-expected weekly draw-down in crude inventories, adding fuel to an existing rally on fading concerns over Britain’s exit from the European Union.

The potential for an oil workers’ strike in Norway and a crisis in Venezuela’s energy sector also added support to crude futures.

The U.S. Energy Information Administration said crude stockpiles fell by 4.1 million barrels for the week to June 24, the sixth consecutive week of drawdowns.

That was more than the 2.4 million barrels expected by analysts in a Reuters poll. The American Petroleum Institute trade group had published a drawdown similar to the EIA’s on Tuesday, boosting crude futures in post-settlement trade.

the EIA also said gasoline stocks had an unseasonably large increase of 1.4 million barrels, compared with analysts’ expectations for a 58,000-barrel gain. On the East Coast, gasoline stockpiles rose to record levels.

That made some traders bearish on their longer-term view of oil.