Oil prices rise, buoyed by report of drop in US inventories

Oil prices are rising today, buoyed by a report of an unexpectedly sharp drop in crude inventories in the United States. North Sea Brent crude was up nearly 1.4 percent at around 17:30 CET, climbing above 74 dollars per barrel. US light crude West Texas Intermediate (WTI) was up around 1.3 percent, trading close to 69.5 dollars per barrel.

The US government’s Energy Information Administration (EIA) said today that US crude inventories fell by 4.3 million barrels last week to 440.8 million barrels. Analysts polled by Reuters had forecast a much smaller decline of 650.000 barrels.

However, concerns about excess supply and weak demand persist in the market. Oil prices plunged by nearly four percent on Tuesday amid these concerns, closing at their lowest levels since the end of June. “Concerns about the global economy next year, a lack of resolve within the OPEC+ group to cut supply, and higher output elsewhere, including record production levels in the United States, are creating significant downward pressure on oil prices at the end of the year,” said Craig Erlam, an analyst at OANDA.

Investors are now awaiting today’s decision by the US Federal Reserve (Fed) on monetary policy. The Fed is widely expected to leave its key interest rate in the 5.25 to 5.50 percent range, its highest level since 2001.

However, IG analyst Yeap Jun Rong noted that financial markets are pricing in “aggressive” Fed rate cuts next year. Any disruption to those expectations would strengthen the US dollar and undermine demand for riskier assets, thereby putting downward pressure on oil prices, Reuters reported.

Oil prices in dollars per barrel (about 159 liters):

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