Oil prices rise on bigger-than-expected draw in US inventories

Investing.com-- Oil prices rose in Asian trade, extending a recent rebound as a bigger-than-expected draw in U.S. inventories ramped up bets on tighter supplies and improving demand in the world’s biggest fuel consumer.

Crude markets were nursing steep losses over the past week, as a string of weak economic readings from top importer China drummed up concerns over slowing global demand.

Brent oil futures expiring in September rose 0.4% to $85.41 a barrel, while West Texas Intermediate crude futures rose 0.5% to $81.88 a barrel by 23:45 ET (03:45 GMT). 

US inventories see sustained draws 

Official data from the Energy Information Administration showed U.S. oil inventories shrank by nearly 4.9 million barrels, compared to expectations for a 0.9 million barrels. 

The data showed U.S. inventories clocking a third straight week, as demand in the world’s biggest fuel importer appeared to be picking up with the travel-heavy summer season. 

But the weekly inventory draw was muddled by builds in distillates and gasoline inventories, which indicated that demand might be slowing after an initial boost from the Independence Day week. 

Fed easing hopes boost crude, dent dollar

Oil was also buoyed by the increasing prospect of an interest rate cut by the Federal Reserve, which battered the dollar in recent sessions. 

Soft inflation readings and dovish-leaning comments from Fed officials saw traders ramp up bets that the central bank will begin cutting rates by as soon as September.

Lower rates present a stronger outlook for economic growth, which fosters oil demand. They also weigh on the dollar, which helps oil demand by making crude cheaper for international markets. 

China concerns remain in play

But bigger gains in crude were held back by persistent concerns over China, as recent data showed that economic growth in the world’s biggest oil importer slowed in the second quarter.

Concerns over increased trade tensions with the U.S. also grew after a Bloomberg report said the U.S. government was considering stricter restrictions on China’s technology and chipmaking sectors.

Such a move could draw ire from Beijing, sparking a renewed trade war between the two countries.