By Adedapo Adesanya
Crude oil prices dropped on Wednesday despite the Energy Information Administration (EIA) reporting a 7.4 million-barrel draw in crude inventories in the United States for the week to June 11.
Brent crude traded at $74.16 per barrel, losing 22 cents or o.3 per cent while the United States West Texas Intermediate (WTI) fell 0.26 per cent or 24 cents to trade at $71.93 per barrel.
The drop in stockpiles beat analysts’ expectation of a draw of 3 million barrels for last week as demand for oil and fuels rebounds and driving season begins for millions of Americans who have been fully vaccinated.
A day earlier, the American Petroleum Institute (API) estimated a crude oil inventory draw of 8.537 million barrels for the period, which sent prices even higher.
For the previous week, the EIA had reported an oil inventory draw of 5.2 million barrels.
The bearish premise occurred as the US Dollar recorded its strongest single-day gain in 15 months after the Federal Reserve signalled it might raise interest rates at a much faster pace than assumed.
A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.
The news was a surprise to the market which had been fixated on the improved demand caused by the summer travel season and the slow pace of the Iran nuclear deal talks.
The Trump administration withdrew the US from the Iranian nuclear agreement in 2018, reimposing sanctions that have limited Iran’s exports including crude oil. The country responded by breaching nuclear enrichment limits under the treaty.
The US isn’t a direct participant in talks aimed at seeing Iran move back into compliance with the agreement, but the Joe Biden administration has signalled that it would be prepared to rejoin an agreement that sees the Middle East producer agree to abide by the terms, a decision that could bring more oil into the market.
However, the market still remained optimistic as the world’s largest crude exporter, China recorded a 4.4 per cent refinery output in May from the same month a year ago to a record high.
