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Oil rises as US crude inventories shrink ahead of Fed decision

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Oil rose as industry data signaled a sharp drop in US crude inventories ahead of an expected Federal Reserve rate hike.

est Texas Intermediate futures moved towards $96 a barrel after closing 1.8 percent lower in the previous session. The American Petroleum Institute reported that crude inventories fell 4.04 million barrels last week, according to people familiar with the figures. If confirmed by the Energy Information Administration later Wednesday, it would be the biggest draw since late May.

The Fed is expected to approve another big rate hike on Wednesday to combat rampant inflation, escalating fears that the US could be headed for a recession. Fears of an economic slowdown have gripped commodities, overshadowing signs of a tight physical crude market.

“If the Fed adopts an even more hawkish stance amid persistent inflationary pressures, there could be some downward pressure on oil prices in the near term,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd. “Despite concerns about weaker economic growth, supply-side issues should keep the market tight.”

Oil is up more than 25 percent this year, although the market has been battered by low liquidity in recent months. Majors like Shell Plc and Exxon Mobil Corp. are due to report their second quarter results this week and are expected to post record profits following the rise in energy prices.

U.S. gasoline inventories fell 1.06 million barrels last week, while crude oil inventories at the main storage location in Cushing, Oklahoma, rose, the API said. The EIA is expected to report that nationwide crude inventories fell by 1.5 million barrels, according to the median estimate from a Bloomberg survey.

The Biden administration unveiled plans to replenish the country’s depleted oil reserves, which were being tapped to counter soaring gasoline prices. The Department of Energy plans to replenish the Strategic Petroleum Reserve with oil purchases, which are expected to begin after fiscal 2023 and could be done through fixed-price contracts, an administration official said Tuesday.

A group of Republican senators, including Marco Rubio, introduced a bill that would sanction China’s oil purchases from Russia, but the proposal faces a strong chance of gaining a vote in the Democrat-controlled Senate. It also goes against the Biden administration’s policy, which aims to keep Russia’s crude oil flowing while capping Russia’s energy revenues.

https://www.independent.ie/business/world/oil-climbs-as-us-crude-stockpiles-shrink-ahead-of-fed-decision-41871103.html Oil rises as US crude inventories shrink ahead of Fed decision

Fry Electronics Team

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