Oil extends rally after large drop in US inventories

Oil prices continued to rally on Wednesday for the third day in a row, on hopes for an improved US demand after the American Petroleum Institute showed in preliminary a larger-than-expected drop in US crude inventories, which comes ahead of the EIA official report.

The US crude rose 1.8% to $40.56 a barrel, after it opened at $39.83, and hit an intraday low of $39.56, and Brent crude rose 2.6% to $42.60 a barrel, after it opened at $41.52, and hit a low of $41.49.

The US crude gained 0.5% and Brent futures gained 0.1% yesterday, posting the second daily gain, after the release of upbeat data on the Chinese economy.

The US crude gained more than 98% and Brent rose 60% during the second quarter, posting their first quarterly gain during 2020.

This came thanks to global demand hopes after easing the coronavirus-lockdown in most countries, and the OPEC-Plus output cut agreement.

The American Petroleum Institute (API) revealed yesterday in preliminary data the US crude inventories fell 8.2 million barrels during the week ending June 26, more than forecasts of a drop by 0.7 million barrels.

The total inventories fell to the lowest level since the week ending May 29 at 537 million barrels, in a positive sign of the demand and consumption levels in the US after easing the coronavirus lockdown.

While the US Energy Information Administration (EIA) will release today the official data on inventories and production levels in its weekly report, with forecasts for inventories to drop by 0.9 million barrels.