Oil Prices Rise as US Inventory Falls and Saudi Arabia Plans Production Cuts

US Energy Information Administration data revealed a sudden decline in crude inventories by 500,000 barrels during the week ending on June 2, while expectations were for a jump of more than one million barrels.

Gasoline stocks increased in the United States by about 2.8 million barrels, and distillate stocks increased by 5.1 million barrels, while markets expected an increase of 1.33 million barrels.

The unexpected increase in fuel stocks raised concerns about consumption by the world’s largest oil user, especially as demand for travel grew during the Memorial Day weekend this weekend.

Earlier in the session, Oil prices fell on the back of weak Chinese economic data. China’s exports contracted faster than expected in May, and imports fell, albeit at a slower pace, as factories struggled to attract demand from abroad and domestic consumption remained weak.

Wednesday’s data also showed that crude oil imports into China, the world’s largest oil importer, rose to their third highest monthly level ever in May, as refineries boosted stockpiles.

Also, supporting prices, the dollar fell as chances of a Fed rate hike next week faded. A weaker dollar boosts demand for oil, as crude becomes cheaper for buyers holding other currencies.

The Organization for Economic Co-operation and Development said that global economic growth will pick up only moderately over the next year as the full effects of higher interest rates are felt. In its latest report, the organization predicted that the global economy would grow 2.7 percent this year, up from 2.6 percent in its forecast in March.

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Brent crude futures closed up 66 cents, or 0.9 percent, to $76.95 a barrel, while US West Texas Intermediate crude futures rose 79 cents, or 1.1 percent, to $72.53, according to Reuters data.

The two benchmarks jumped more than a dollar on Monday after Saudi Arabia’s decision to voluntarily cut production by an additional million barrels per day in July.

“It appears that oil futures contracts are in a state of ‘tug and pull’ with slowing demand for manufacturing in China and declining demand for diesel, against expected production cuts from OPEC and Saudi Arabia,” said Dennis Kessler, senior vice president of trading at BOK Financial.