The U.S. benchmark West Texas Intermediate (WTI) surged more than 2.9% following a larger-than-expected draw on U.S. crude stockpiles and a weakening U.S. dollar. Over the past three weeks, U.S. crude oil inventories have decreased by over 20 million barrels as the summer driving season boosts demand. Brent crude also saw a slight increase, but only half as much as WTI, with prices rising 1.72% to $85.17 per barrel.
While both benchmark crude prices have increased in the past week, WTI has shown more significant gains, reducing Brent’s premium to just $2.12. The market is currently in a state of backwardation, with front-month contracts trading at a notable premium compared to longer-term contracts. The decrease in U.S. crude exports to Europe, in addition to export cuts by major OPEC+ countries like Saudi Arabia and Russia, is expected to further lower U.S. crude inventory levels in the coming months.
The EIA’s report of a 4.9 million barrel draw on U.S. crude inventories, combined with a weakening dollar, has helped drive up oil prices despite concerns about economic growth in China. With China’s Q2 economic growth at its slowest rate since last year, global crude oil demand has been impacted, but the positive inventory news and dollar devaluation have supported higher prices.