Oil prices surged on Wednesday, remaining near two-month peak levels. This came after industry data revealed a substantial drawdown in U.S. oil inventories over the past week, which bolstered optimism about energy demand.
Brent crude futures for September delivery rose 0.2 percent to $86.41 per barrel, while West Texas Intermediate (WTI) crude futures gained 0.2 percent to $82.07 per barrel as of 8:35 PM ET.
Large inventory drawdown boosts optimism
The price gains came after data from the American Petroleum Institute showed U.S. crude inventories shrinking by nearly 9.2 million barrels last week, much more than the expected 0.15 million barrel draw. This raised optimism about higher fuel consumption during the busy summer travel season.
Expectations for record road travel
“The large inventory drawdown has boosted hopes for strong demand as the peak summer travel period gets underway,” said an oil market analyst. Indeed, the American Automobile Association has forecast record road travel this week due to the Fourth of July holiday.
Fading hurricane concerns, lingering geopolitical risks
The drawdown in inventories came despite some profit-taking and easing fears of supply disruptions from Hurricane Beryl. The hurricane is now expected to weaken to a tropical storm before reaching the Gulf of Mexico. Broader geopolitical risks in the Middle East also remained a concern for oil markets.
Read more: Oil prices rise as demand optimism builds ahead of U.S. inventory report
However, a weaker U.S. dollar – partly driven by dovish comments from Federal Reserve Chair Jerome Powell – provided some support to prices.
Focus on Fed and economic data
Overall, the focus this week will be on any further signals from the Fed and key economic data, which could offer more insight into the demand outlook.
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