By Nicole Jao
NEW YORK (Reuters) -Oil prices edged higher on Wednesday after US oil storage data showed a larger-than-expected draw in crude stockpiles as refiners ramped up output ahead of the summer driving season.
futures increased 31 cents, or 0.37%, to $83.47 a barrel by 2 pm EDT (1800 GMT). US West Texas Intermediate crude futures rose 50 cents, or 0.64%, to $78.88 a barrel.
inventories fell by 1.4 million barrels to 459.5 million barrels in the week ending May 3, according to the Energy Information Administration (EIA), slightly more than analysts’ expectations. [EIA/S]
“Stronger refining activity and exports have encouraged a minor draw to crude inventories, helping unwind some of last week’s large build,” said Matt Smith, lead oil analyst at Kpler.
The EIA, however, expects slower global oil demand growth for the year, a forecast report showed. [EIA/M]
A strengthening US dollar limited crude oil prices. A stronger dampens oil demand by making it more expensive for investors holding other currencies.
Hopes of a ceasefire in Gaza have put some downward pressure on oil prices in recent trading sessions, with some analysts saying the risk premium on oil had declined in tandem.
“Taking away the current geopolitical trigger leaves the market staring into a world of sticky inflation in the US that is countered by interest rates that not only keep the US dollar elevated but make any sort of commodity trading more expensive,” PVM Oil analyst John Evans said.
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The US believes negotiations on a Gaza ceasefire should be able to close the gaps between Israel and Hamas. US Central Intelligence Agency Director William Burns traveled to Israel on Wednesday and met with Israeli Prime Minister Benjamin Netanyahu, an Israeli official said.
Morgan Stanley (NYSE:) analysts said they see the geopolitical risk for oil prices dissipating as fears of further escalation in the conflict subsidy.
Cautious expectations on supply cuts from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) ahead of a June 1 policy meeting also weighed on markets.
Russian Deputy Prime Minister Alexander Novak said on Tuesday that there had been no discussions about an oil output increase by OPEC+.
This came after an earlier statement in the day in which he said the group had the option of increasing production.
