Oil snaps three-day drop as report points to US stockpile draw

Oil rose, snapping a run of losses, after an industry report indicated that US crude inventories fell for a fourth week.

Brent rose above $81 a barrel after shedding almost 5% over the previous three sessions, with West Texas Intermediate near $77. The industry-funded American Petroleum Institute reported stockpiles shrank by 3.86 million barrels, with a drop also seen at the Cushing, Oklahoma, hub.

If confirmed by official figures later Wednesday, a fourth decline would be the longest such stretch since September. While inventories typically fall in the third quarter, current holdings are below the five-year seasonal average.

Oil’s recent bout of weakness has come amid concerns about softer demand in China, the world’s biggest crude importer, with algorithmic traders compounding the downward pressure. Futures remain higher year-to-date, however, as OPEC+ presses on with output curbs, with a Bloomberg tally of Russian flows showing exports dropping to the lowest since December.

Elsewhere on the supply side, a rash of wildfires across Canada’s oil patch were threatening almost 10% of the region’s oil production. There were 170 blazes burning in Alberta alone, with more than 50 of them out of control.

“The pullback so far has removed the froth that had built up through the rally in June and first week of July,” said Vandana Hari, founder of Vanda Insights in Singapore, adding that she expected crude to bottom soon. “The market has tempered its summer oil-demand bump optimism.”

Technicals may also be signaling that oil’s latest drop has been overplayed. Crude is oversold based on the nine-day relative strength index, and futures are still trading below their lower bollinger band. – moneyweb.co.za