By Adedapo Adesanya
Oil prices rose 2 per cent on Wednesday after a large unexpected drawdown in crude inventories in the United States, the world’s largest oil producer.
Brent crude futures increased by $1.52 or 2 per cent to $78.36 a barrel, as the US West Texas Intermediate crude (WTI) gained $1.43 or 2 per cent to settle at $74.34 per barrel.
US crude inventories posted a massive surprise weekly drawdown of 12.5 million barrels to 455.2 million barrels, the Energy Information Administration (EIA) said, as imports declined.
A day earlier, the American Petroleum Institute (API) had estimated that crude oil inventories in the US had gone down by a sizable 6.7 million barrels, which surprised traders and prompted increased oil buying that boosted prices.
A week earlier, the EIA had estimated a crude oil inventory build of 5 million barrels, which, however, failed to move prices depressed by fears of a US debt default.
At 455.2 million barrels, the EIA said, US crude oil inventories are 3 per cent below the five-year seasonal average.
The US continues to be stuck over negotiations on raising the debt ceiling, which has weighed on market sentiment in recent weeks.
On Wednesday, there were no signs of progress in debt ceiling talks as the June 1 deadline ticked closer to raise the federal government’s borrowing limit or risk default.
However, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, on Tuesday warned traders again against shorting oil futures less than two weeks before the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) panel on production policy meets on June 4.
In his words, “I keep advising them that they will be ouching — they did ouch in April,” the de-facto OPEC chief said at the Qatar Economic Forum on Tuesday.
The comments from the most important oil official in the world’s top crude oil exporter raised speculation that OPEC+ could surprise markets again when the ministers of the alliance meet in early June.
The market will be looking to boost from the US Memorial Day holiday on May 29, which marks the beginning of the peak summer travel season and higher fuel demand.
Meanwhile, Britain’s high inflation rate fell by less than expected last month, according to official data that raised the chances of more interest rate hikes.
