Oil prices rise on US inventories drawdown expectations

Washington: Oil prices rose on Wednesday on expectations for higher demand as the US dollar weakened and a report showed US crude and gasoline inventories fell while the release of inflation data may point to a more supportive economic outlook.

Brent crude futures were up 50 cents, or 0.6 percent at $82.88 a barrel. US West Texas Intermediate crude futures (WTI) rose 52 cents, or 0.7 percent, to $78.54 a barrel.

US crude oil inventories fell 3.104 million barrels in the week ended May 10, according to market sources citing American Petroleum Institute's figures on Tuesday. Gasoline inventories fell by 1.269 million barrels, and distillates rose by 673,000 barrels.

US government inventory data is due later on Wednesday and are likely to also show a drop in crude stockpiles as refineries increase their runs meet increased fuel demand heading into the peak summer driving season.

“Expectations of another drawdown in US oil inventories should support oil prices,” ANZ Research said in a note.

US Consumer Price Index (CPI) data is also due on Wednesday and should give a clearer indication whether the Federal Reserve may cut interest rates later this year, which could spur the economy and boost fuel demand.

Oil prices also found support from a softer US dollar and stimulus measures from China, said independent market analyst Tina Teng, with a weaker greenback making dollar-denominated oil cheaper for investors holding other currencies.

Teng was referring to China's plans to raise one trillion yuan in long-term special treasury bonds this week to raise funds to stimulate key sectors of its flagging economy, which is the world's largest oil importer.

“The US CPI and China's economic data are key to driving oil prices for the rest of the week,” she added. China will release economic activity data on Friday.

Prices were also supported by concerns around Canadian oil supply, a key exporter to the US.

A large wildfire is approaching Fort McMurray, the hub for Canada's oil sands industry that produces 3.3 million barrels per day of crude, or two-thirds of the country's total output.

SOURCE: REUTERS