Weaker-than-Expected Draw Drives Crude Oil Lower

Crude oil prices fell on Thursday after government data showed a lower than expected inventory draw than reported by an industry group late Wednesday.

U.S. commercial crude stockpiles fell by 2.2 million barrels to a total of 524.4 million in the week through July 1, according to the U.S. Energy Information Administration.

On Wednesday, the American Petroleum Institute (API) said its data showed crude oil stockpiles fill by 6.7 million barrels last week, declining for a seventh week in a row.

The EIA report also showed gasoline inventories fell by about 100,000 barrels and distillate fuel stocks decreased by 1.6 million barrels.

Also from the EIA, preliminary weekly data showed U.S. production fell by 194,000 barrels per day, primarily due to declines in Alaska’s output.

Prices were up early in the session as buyers were encouraged by the friendly API report and a weaker U.S. Dollar, but the market turned south following the release of the EIA report.

August Comex Gold was under pressure during the regular U.S. trading session after a preliminary jobs report helped strengthen the U.S. Dollar.

According to data released by ADP and Moody’s, private sector payrolls rose more than expected in June, led by gains in small-business jobs. The report showed that private sector jobs grew by 172,000, while economists polled by Reuters forecast a gain of only 159,000. The May number was revised down to 168,000 from 173,000.

The GBP/USD rebounded on Thursday after a two-day setback, helped by better-than-expected UK factory data and a slight increase in demand for risky assets. Profit-taking and short-covering also underpinned the Sterling.

UK manufacturing and industrial output data for the three months to May were slightly better than expected, but they remained weaker from the previous month.

Despite the strength, investors feel the British Pound could move as low as 1.2000 over the near-term as the Bank of England prepares to ease monetary policy.

The USD/JPY was weaker on Thursday ahead of Friday’s critical U.S. Non-Farm Payrolls report. The consensus forecast is for a 175,000 jobs gain for June. However, investors are preparing for a possible negative surprise.

The AUD/USD was down after S&P downgraded the outlook on Australia’s AAA credit rating to negative from stable.

U.S. stocks traded mixed and in range in reaction to today’s weaker-than-expected crude oil inventory data. Volume was below average, however, as investors remained on the sidelines in front of Friday’s job report.