Oil prices drop despite lower U.S. inventories, eyes on China

Brokers report that oil prices on the New York Fuel Exchange are declining for another session despite data showing a decrease in crude oil inventories in the USA, which would typically indicate an increase in demand.

A barrel of West Texas Intermediate crude oil for August deliveries costs $80.67 on NYMEX in New York, down 0.11%. Meanwhile, Brent oil on ICE for September is priced at $83.63 per barrel, down 0.12%.

Industry estimates indicate another decline in crude oil inventories in the USA. The American Petroleum Institute (API) reported in its calculations that crude oil inventories in the USA decreased by 4.44 million barrels last week. Inventories at the Cushing hub dropped by 746,000 barrels during this time, calculated API.

Gasoline inventories increased slightly by 365,000 barrels, and distillate fuels rose significantly by 4.92 million barrels, according to the API in its report.

Meanwhile, investors are concerned about the weak demand for crude oil from China, the world's largest resource importer.

Jun Rong Yeap, market strategist at IG Asia Pte Ltd, said the weaker data on economic growth in China "cast some doubts on whether market participants are being overly optimistic around Chinese oil demand outlook."

He stated that hopes for stronger economic stimulus from China after the Third Plenum of the Chinese Communist Party have also somewhat faded.

The Third Plenum of the Chinese Party, taking place this week, is usually a forum for adopting long-term political and economic reforms. However, observers generally believe that major initiatives to support economic growth in China are unlikely this time.

Meanwhile, Russia plans to make additional cuts in oil production to compensate for pumping above the set quota under the OPEC+ alliance.

Sources close to the matter indicate that additional production cuts could occur in the summer and early fall when Russia needs less oil for domestic consumption.