Oil rises, supported by the decline in US crude and fuel inventories

Oil prices rose in early Asian trading on Wednesday after data from the sector showed a significant drop in crude oil inventories ahead of government data.

Brent crude rose 16 cents, or 0.2 percent, to $80.93 a barrel by 0006 GMT, while US West Texas Intermediate crude rose 25 cents, or 0.3 percent, to $77.32 a barrel.

Market sources, citing American Petroleum Institute figures, said on Tuesday that US crude stocks fell by about 6.1 million barrels in the week ending April 21. Analysts had expected crude stocks to drop by about 1.5 million barrels.

The sources added that gasoline stocks also decreased last week, while distillate stocks increased. The US government is due to release data on inventories on Wednesday.

Crude oil prices settled down more than 2 percent on Tuesday after US consumer confidence fell to a nine-month low in April, stoking fears of a recession.

On Monday, the US First Republic Bank announced a decline in its deposits by more than $ 100 billion, which raised fears of a possible banking crisis.

Investors expressed concern that anticipated interest rate increases by central banks fighting inflation would slow economic growth and harm energy demand in the United States, Britain and the European Union.

The Federal Reserve, the Bank of England and the European Central Bank are expected to raise interest rates at their next meetings. The US Central Bank meets on the second and third of May.

U.S. crude oil prices settled lower Wednesday, as ongoing worries about slowing economic growth continued to cloud the outlook for oil demand, overshadowing data showing a much larger-than-expected drop in weekly crude inventories.

On the New York Mercantile Exchange crude futures settled 1.26% lower at $76.10 a barrel, while on London’s Intercontinental Exchange, Brent fell 1.54% to settle at $79.53 a barrel.

Inventories of U.S. crude fell by 5.1 million barrels for the week ended Apr. 21, following a 4.6M barrel draw in the prior week and below the expected 1.5M barrel decrease, according to data from the Energy Information Administration (EIA).

The large decrease in crude supplies was driven by another big release from the Strategic Petroleum Reserve, which dropped by more than 1M for a second straight week.

Gasoline inventories, meanwhile, fell by 2.4M barrels, compared with expectations for a draw of 933,000 barrels, while supplies of distillate — the class of fuels that includes diesel and heating oil – slipped by 576,0000M barrels, but that was short of expectations for a decrease of 839,000 barrels.

The mixed products data emerged as refinery activity edged up to 91.3% of capacity last week from 91% the prior week, with crude inputs averaging about 15.83M barrels per day, down 11,000 barrels from the prior week, the EIA said.

The mostly positive inventory data, however, played second fiddle to ongoing fears about the impact of a slowdown in the U.S. economy on energy demand.

“The lack of a strong signal from fundamental data has seen investors with a short-term focus dominate trading,” ANZ Research said in a note. “This has seen Brent crude hover around levels seen just before OPEC surprised markets with an output cut at early April,” it added.

Traders, meanwhile, also appear reluctant to make big bets ahead of the Federal Reserve’s May 2-3 meeting that is expected to culminate in what many expect may prove the final rate hike for the year.