Oil Prices Dip 2% Despite Sixth Weekly Inventories Drop

By Adedapo Adesanya

Oil futures in the international market fell more than 2 per cent on Wednesday as expectations that positive crude inventories data will push up prices failed as demand weakened in the largest consumer, the United States.

The Brent crude was down $1.14 or 2.5 per cent to quote at $44.43 per barrel, while the US West Texas International (WTI) crude lost $1.11 or 2.6 per cent to trade at $41.65 per barrel.

Earlier in the session, the market had risen on signs that glut was easing with US crude stockpiles shrinking for a sixth week.

The American Petroleum Institute (API) had first reported that crude inventories dropped by 6.36 million barrels last week, according to people familiar with the figures. That would be the longest run of declines this year if confirmed by government data later released on Wednesday.

The Energy Information Administration (EIA) then confirmed that crude inventories fell by 9.4 million barrels in the last week to 498.4 million barrels, more than what analysts expected. The data reflects a period during which Hurricane Laura shut output and refining facilities which shut off almost 85 per cent production capacity.

What made prices turn downward was the weekly government data showing lower demand for petrol, the major end product of crude, this shrugged off bullish inventory data.

The EIA on Wednesday also reported that petroleum supply fell by 4.3 million barrels.

American crude inventories, a key metric used to gauge global supply, have slipped from near-record highs in June, helped partly by Saudi Arabia limiting shipments to the country.

However, due to the current global environment, the longer-term outlook remains more uncertain.

Analysts also noted that global demand may take a hit over September and October as Chinese imports ease with state-issued quotas for independent refiners dwindling following a crude buying spree earlier this year.

News that the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+ raised output by about 1 million barrels per day in August may also have contributed to the market outcome on Wednesday.