Oil steadies as U.S. inventories shrink, Powell speech awaited

Investing.com -- Oil prices rose slightly in early Asian trade on Wednesday after data suggested that U.S. crude inventories shrank in the past week, although anticipation of more cues on global interest rates kept traders on edge. 

Crude prices were nursing steep losses over the past five sessions, amid persistent concerns that rising interest rates will weigh on economic activity and erode crude demand. 

Signs of tightening near-term supply and some resilience in the U.S. economy have done little to alleviate weakness in oil markets this year, as economic conditions worsen in the rest of the world.

Brent oil futures rose 0.2% to $72.63 a barrel, while West Texas Intermediate crude futures rose 0.2% to $67.80 a barrel by 22:07 ET (02:07 GMT). Both contracts sank nearly 7% each, or about $5, in the past five sessions. 

U.S. inventories seen shrinking as summer demand heats up

In some positive cues for oil markets, data from the American Petroleum Institute (API) showed that U.S. oil inventories shrank by a bigger-than-expected 2.4 million barrels in the week to June 23, much more than expectations for a draw of 1.47 million barrels.

A sharp drop in gasoline inventories pointed to improving fuel demand in the world’s largest oil consumer, amid the travel-heavy summer season.

The API data usually heralds a similar trend in inventory readings from the Energy Information Administration, due later on Wednesday. A drop in inventories points to some tightening in U.S. supplies, especially as near-term demand improves.

The data also comes after a clash between Russia and the mercenary group Wagner fueled some concerns over renewed disruptions in global oil supplies, although the clash appeared to be short-lived.

Interest rate fears persist ahead of Powell, Lagarde speeches 

But despite some signs of tightening supplies, oil prices were nursing steep losses on fears of rising interest rates in the U.S. and Europe.

Central Bank leaders Jerome Powell and Christine Lagarde are set to speak at a European Central Bank forum later in the day, and are both expected to offer a hawkish outlook on interest rates.

Powell had already warned last week that the Federal Reserve could hike interest rates at least two more times this year, while Lagarde also flagged more rate hikes on Tuesday.

The prospect of rising interest rates, coupled with worsening economic conditions across the globe, have weighed heavily on oil prices this year, despite repeated production cuts in Saudi Arabia and tightening supplies.

Data on Wednesday also showed that Chinese industrial profits continued to decline this year, raising concerns over weak fuel demand in the world’s largest oil importer.