Oil drops as dollar muscles up to four-week high

Oil futures fell in American trade as the dollar index powered up to the highest since July 26, following earlier data from the US, the world's largest energy consumer, including the EIA report that showed a larger-than-expected inventory drawdown last week. 

As of 06:07 GMT, US crude futures due on September 15 fell 0.53% to $47.30 a barrel from the opening of $47.55, while Brent crude futures due on October 16 slid 0.16% to $50.72 a barrel from the opening of $50.80, as the dollar index advanced 0.21% to 94.05 from the opening of 93.85, marking a four-week high. 

Earlier US data showed building permits fell more than expected as housing starts declined unexpectedly in July, as markets now await the Fed's last meeting minutes, at which policymakers voted to maintain interest rates at between 1.00% and 1.25%, while confirming their plan to normalize the massive $4.5 balance sheet later this year. 

Otherwise, the Energy Information Administration released its report on US crude stocks, showing a big drawdown of 8.9 million barrels in the week ending August 11, compared to 6.5 million in the previous reading, while analysts expected a fall of 3.0M, with total stocks now falling to 466.5 million barrels, remaining within the uppermost range on average in this time of year.

Otherwise, gasoline stocks remained pretty much the same last week, while distillate inventories rose 0.7 million barrels, both remaining within the uppermost range on average in this time of year.

On another note, Ecuadorian oil minister Carlos Perez said his country will maintain the production ceiling at 541 thousand bpd according to the cuts quota for Ecuador in the OPEC deal to cut production, and it's worth noting that Ecuador failed to join the global initiative launched by OPEC at first in order to sap global oversupply due to the country's internal economic dilemmas recently. 

Moving on, according to the National Statistics Office in China, oil refineries fell by the fastest rate in three years last month, while production fell from a year-high as well. 

Otherwise, oil services company Baker Hughes reported a rise of 3 rigs in the US oil rig count to 768 rigs, marking the highest since April, 2015, as US shale production steadied at 9.43 million bpd, a two-year high. 

OPEC's earlier monthly report showed production levels rose by 173 thousand bpd to 32.87 million bpd in July, pointing the finger at Libya and Nigeria in particular for their exempt status from the deal to cut production by 1.8 million bpd until next March. 

OPEC is responsible for 1.2M of these cuts, while Russia and other independent producers take charge of 0.6 million, and additionally, the report said Saudi Arabia increased output by 32 thousand bpd to 10.07 million bpd, while Iraqi and Venezuelan production fell, and global supplies overall rose by 17 thousand bpd to an average of 97.3 million bpd. 

The report maintained its projections for global demand growth at 1.37 million bpd in the next half of 2017 to an overall average of 57.77 million bpd, while stating the oil imports rose last month by 33 thousand bpd to 8 million bpd, compared to 7.9 million in June, as price rose 4% compared to June levels.