Oil prices fall despite falling inventories

Oil prices fall despite falling inventories
Oil prices fall despite falling inventories

Oil prices fell on Thursday, retreating from the previous session’s multi-month highs, with investors taking profits on cautious demand despite last week’s decline in U.S. inventories.

Oil prices fall

Brent crude futures were down 47 cents, or 0.56%, at $86.86 a barrel by 1211 GMT, while West Texas Intermediate (WTI) crude futures fell 54 cents, or 0.64%, to $83.34 in thin trading due to the U.S. Independence Day holiday.

Brent crude gained 1.3% in the previous session to close at $87.34, its highest level since April 30. WTI crude oil hit an 11-week high of $83.88.

The gains followed a bigger-than-expected drop in U.S. crude stockpiles. The U.S. Energy Information Administration (EIA) reported a draw of 12.2 million barrels in inventories. Analysts polled by Reuters had expected a draw of 680,000 barrels.

Given the weak dollar and improved outlook for U.S. fuel demand following the EIA data, Thursday’s price weakness is not expected to last, PVM analyst Tamas Varga said.

According to OANDA analyst Kelvin Wong, the drop in oil prices on Thursday morning was partly due to profit-taking by traders following recent gains.

Concern about demand

However, German industrial orders unexpectedly fell in May, adding to signs that a recovery in Europe’s largest economy remains elusive.

Demand concerns were heightened by US data showing that first-time claims for jobless benefits in the US rose last week, while jobless numbers also rose.

On the contrary, analysts believe that weaker economic data could accelerate interest rate cuts by the US Federal Reserve, which could support oil markets.

Weaker US data has already prompted markets to raise the probability of a September rate cut to 74% from 65%.

Possible increase in oil prices

Swiss bank UBS expects Brent crude to hit $90 a barrel this quarter, it said in a note to clients, citing OPEC+ production cuts and expected declines in oil inventories.

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