Crude oil futures trade higher after API reports US inventory draw

Crude oil futures were higher in mid-morning trade in Asia July 28, supported by a weakening dollar and bullish data from the American Petroleum Institute showing a larger-than-expected draw in crude oil inventories.

At 10:40 am Singapore time (0240 GMT), the ICE September Brent futures contract was up 44 cents/b (0.59%) from the previous close at $74.92/b, while the NYMEX September light sweet crude contract was 48 cents/b (0.67%) higher at $72.13/b.

API data released late July 27 showed US crude oil stocks fell by 4.73 million barrels in the week ended July 23, analysts said. Analysts surveyed by S&P Global Platts on July 26 had been expecting a 2.5 million-barrel draw.

Investors will be looking to the Energy Information Administration's weekly report due for release at 10:30 am EST (1430 GMT) to confirm the draw.

"Most energy traders were unfazed by last week's build, so expectations should be high for the EIA crude oil inventory data to confirm inventories resume their declining trend," OANDA senior market analyst Edward Moya said in a note.

Rising oil prices were also helped by a weakening dollar, with the ICE US dollar index down 0.22% at 92.45 as of 0240 GMT.

"Oil prices are riding the tailwind of a weakening US dollar as investors expect [Federal Open Markets Committee chair] Jerome Powell to reiterate his dovish stance at Wednesday's FOMC meeting," said IG DailyFX Strategist Margaret Yang July 28.

Nonetheless, any sustained increase in oil prices will be short-lived due to the rising number of COVID-19 cases worldwide, analysts said. Data from the World Health Organization showed the total number of cases rose by 410,645 as of 5:54 pm CEST (1554 GMT) July 27. Southeast Asia had the highest number of cases, accounting for 111,701 of the total, WHO data showed.

COVID-19 cases have also been climbing sharply in the US, a trend that has drawn attention from US health officials. The US Centers for Disease Control and Prevention issued guidance July 27 urging vaccinated individuals to wear a mask in public indoor settings in areas with substantial or high transmission.

The US has seen its seven-day moving average of COVID-19 cases triple in July to 51,939 as of July 25, data from The New York Times showed.

"Lingering pandemic concerns and the emerging of the delta variant may cast a shadow over the outlook for energy demand, capping the upside," Yang said.