Oil price nears $72 per barrel over larger than expected crude draw

Crude oil price closed in on the $72 mark as Brent crude hit $71.85 per barrel on demand optimism and an American Petroleum Institute (API) report of larger than expected draw in crude oil inventories of 5.36 million barrels for the week ending May 28.

Analysts had predicted a draw of 2.114 million barrels for the week.

According to a report from oilprice.com, the API, in the previous week reported a draw in oil inventories of 439,000 barrels after analysts had predicted a draw of 1.050 million barrels, adding that crude oil inventories have grown by more than 46 million barrels since the start of 2020, according to API data.

The American Western Texas Intermediate (WTI) rose by 0.55% to close at $69.21 per barrel on Thursday morning, the Bonny light crude rose by 1.12% to close at $70.15 per barrel while the OPEC basket rose by 0.70% to close at $69.01 per barrel.

Oil prices were trading up on Wednesday afternoon, on bullish signals from OPEC that saw the cartel stick to its output plans for the coming month. The bullish OPEC news, combined with a lack of new developments regarding the Iran/U.S. nuclear deal, has seen oil prices maintain a steady rise.

The latest data from the Energy Information Administration (EIA) says that US oil production continued at an average of 11 million BPD for the week ending May 21, while crude oil inventories fell again this week.

The API reported a build in gasoline inventories of 2.51 million barrels for the week ending May 28—compared to the previous week’s 1.986-million-barrel draw. Analysts had expected a 1.385-million-barrel draw for the week.

What you should know

Oil prices rose on Wednesday as a rebound in oil demand in China, the United States and Europe threatened to outpace planned increases in supply in addition to the uncertainty surrounding the negotiations over the Joint Comprehensive Plan of Action which has recorded little progress.

S&P Global Platts reported that any resolution on the JCPOA remained far from certain as the fifth and final round of negotiations proceeded in Vienna, putting into question the prospect of increased Iranian oil hitting the market.

Also, crude oil prices strengthened further during the week after OPEC+ signalled its growing optimism about the balance between demand and supply, and confirmed that it planned to continue increasing production.