(Bloomberg) — Oil rose after government data showed a decline in U.S. inventories, signaling a tightening in the physical market.
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West Texas Intermediate settled near $79 a barrel as crude oil inventories fell by 1.36 million barrels, according to the Energy Information Administration. The pop shows traders viewing the news as the first bullish indicator among a sea of bearish technical data.
Earlier in the session, WTI fell to its lowest level since mid-March. Oil has been on a downward trend since early April, posting losses in three of the last four weeks, with weakness not only in lead times but also in processing margins. The decline came as geopolitical advantage from tensions in the Middle East has largely faded, returning traders' attention to a slowing market.
An estimate released Tuesday by the American Petroleum Institute predicted an increase in US stocks, according to people familiar with the matter.
“The EIA's more reliable crude oil storage numbers have countered API's surge, which is triggering some shorts in hedge positions that were sold last night and this morning,” Dennis Kissler said , senior vice president of trading at BOK Financial Securities.
A stronger dollar poses an additional hurdle as commodities become more expensive for many investors. The U.S. currency is heading for a third day of gains, according to a Bloomberg gauge, while oil's move below its 100-day moving average also exacerbates the latest period of price weakness.
The Organization of the Petroleum Exporting Countries is due to meet next month to assess supply policy after implementing production cuts in the first half of the year to support prices. Most traders expect the restrictions to be extended, perhaps until the end of the year, according to a Bloomberg survey.
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–With help from Sherry Su.
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