Crude oil prices and related ETFs rallied Wednesday on high inventory drawdowns, reflecting strong demand for oil.
On Wednesday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, was up 3.4% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, added 3.0%, with both oil ETFs testing their short-term resistance at the 50-day simple moving average. Meanwhile, WTI crude oil futures were 3.2% higher to $67.9 per barrel and Brent crude futures were up 3.0% to $74.5 per barrel.
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Oil prices strengthened after the American Petroleum Institute revealed late Tuesday that U.S. crude oil stockpiles declined by 5.2 million barrels for the week ended August 17, the Wall Street Journal reports.
The Energy Information Administration will release its official numbers Wednesday and could show a 2 million barrel drawdown in crude stocks, according to oil analysts.
“The API inventory data published after close of trading yesterday are lending buoyancy to prices this morning,” analysts at Commerzbank said in a note. “Thus, the official inventory data this afternoon are also likely to show a more market inventory reduction, which would see the zigzag course followed by U.S. crude stocks in the summer months continue.”
Crude Oil Finds Support
Crude oil has recently found support on renewed trade talks between the U.S. and China – China previously stated it would cut down on U.S. oil imports due to the escalating trade war.
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Additionally, the looming U.S. sanctions on Iran’s oil industry are expected to cut down on the Middle Eastern country’s exports. President Donald Trump pulled out of an agreement to curb Iran’s nuclear program in May, which reopened plans to impose sanctions on the Islamic Republic.
While oil prices initially popped on the sanctions outlook, the Organization of Petroleum Exporting Countries and its allies began increasing crude output after capping production for more than a year.
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