The Energy Information Administration on Wednesday reported that US crude supplies fell by nearly 11 million barrels for the week ended July 19, which was in line with estimate and more than double the 4.5 million-barrel decline expected by traders. Moreover, domestic oil production fell by 700K barrels to 11.3 million barrels last week. However, the numbers were a result of the Hurricane Barry which caused major distortions in the data. As such, after the initial euphoria, traders switched to profit-taking and sent the prices lower.
Also, the market came under pressure following the reports that Saudi Arabia and Kuwait look to resume oil production in the so called Neutral Zone, which could bring additional supply around 500K barrels per day. This signal adds to worries about global oversupply, especially amid the lingering concerns over a weaker demand due to a slowing global economy.
In the short-term, Brent may follow other riskier assets, which in turn will be influenced by the upcoming ECB meeting. Should the central bank’s tone come too pessimistic, oil could come under additional pressure.