Regarding EIA crude oil inventories fell 7.4 million barrels in the previous week, refining performance rose to 92.6%, the highest level since January 2020, and Brent reached its highest level since April 2019.
Oil prices rose for a fifth day Wednesday, closing at $75 a barrel.
US refineries pulled more crude inventories to boost activity and meet revived demand.
Inventory reduction, a sign of improving worldwide demand, is stronger than expected. The U.S. Energy Information Administration said crude oil inventories fell 7.4 million barrels in the week to June 11, as refinery use rose to 92.6%, the highest level since January 2020 before the pandemic.
The US dollar posted its strongest single-day gain in 15 months after the Federal Reserve signaled it could raise interest rates much faster than default.
Crude oil prices fell on Thursday as the US dollar strengthened after the US Federal Reserve signaled it could raise interest rates faster than expected, but the massive drop in US crude inventories was limited by losses.
The Fed was expected to suspend this meeting and score, but they sent a clear message that they’re ready to start talking about contraction, and that means the dollar has reached satisfaction to blow a headwind for all commodities.
Brent crude futures fell 41 cents, or 0.6%, to $73.98 a barrel as of 0400 GMT, after hitting their highest level since April 2019 in the previous session. West Texas Intermediate (WTI) crude futures which had hit its highest level since October 2018 the previous day, fell 39 cents, or 0.5%, to $71.76 a barrel.
Brent is up 44% this year, supported by supply cuts led by OPEC and its allies, and a recovery in demand. OPEC+, which made historical supply cuts last year, still cuts millions of barrels from the market.
Major oil traders say they expect prices to stay above $70 and expect a return to pre-pandemic levels in the second half of 2022.
On Wednesday, the US Federal Reserve also revealed its 2023 forecasts for the first post-pandemic rate hike. The oil complex analyzed the Fed news and was convinced that there could be a further rise in crude oil prices in the future.
Although indirect talks between Tehran and Washington to maintain the 2015 nuclear deal resumed in Vienna on Saturday, analysts are aware that an imminent increase in Iranian oil exports is unlikely.
A strong dollar makes pricing oil in dollars more expensive in other currencies, potentially lowering demand.
Still, data from the Energy Information Administration was limited as crude oil inventories fell sharply last week in the United States, the world’s largest consumer, refineries’ operations hit the highest level since January 2020, and signs of continued recovery in demand.
In addition, refinery production in China, the world’s second largest oil consumer, reached a record level in May, increasing prices by 4.4% compared to the same month of the previous year. Refinery output hit a record as margins increased.
Ultimately, this drop in oil prices should be temporary because fundamentals on both the supply and demand side can easily offset the strong dollar.