WTI crude falls amid historic drop in US crude stockpiles

WTI crude oil is trading around $79.317 after the historic drop in US crude stocks. The Energy Information Administration (EIA) reported that crude oil inventories fell by 17 million barrels, the steepest decline since records began in 1982.

The American Petroleum Institute indicated that US crude oil stockpiles decreased by around 15.4 million barrels in the week ending July 28, after rising by 1,319 million barrels the previous week. Analysts forecast a decline of 1.37 million barrels. The downgrade of the government’s credit rating by Fitch triggered the correction in WTI prices.

US Treasury Secretary Janet Yellen stated that Treasury securities remain the world’s most secure and liquid asset, and the US economy is fundamentally robust. White House Economic Adviser Jared Bernstein expressed confidence in the US government and Congress to avoid default, and the US Treasury debt remains the safest in the world.

ADP private employment data was stronger than expected, with the number of employed people in the US private sector rising by 324K, above estimates of 189K and lower than the revised reading of 455,000 in June. This reading was above the 12-month average, and investors speculate on a more aggressive Federal Reserve stance, undermining the WTI price. Higher interest rates raise borrowing costs, which can slow the economy and diminish oil demand.

The Organization of Petroleum Exporting Countries (OPEC) and its allies, led by Russia, will hold a meeting on Friday, which could give a clear direction to WTI prices. Oil traders will also take cues from the US Nonfarm Payrolls data, which is expected to create 180,000 jobs.