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Crude oil and Brent oil have broken out of their recent trading ranges today, helped by data from the American Petroleum Institute that pointed to a huge draw in US stockpiles.

WTI has smashed through resistance at $42 and is now testing $44 after adding $1.65 (4%). Brent has added $1.60 (4.5%) to climb towards $46. Prices have risen after the latest API data, released yesterday, showed that US oil inventories fell 8.587 million barrels in the week ending July 31st.

This was over double the drawdown expected by analysts, and means that US inventories have declined by over 15 million barrels in the last two weeks.

Official data from the US Energy Information Administration is due during today’s New York session. Last week’s report showed a 10 million barrel decline, and a 3 million barrel drop is expected for the week ending July 31st although the API data suggests the real number could be much higher.

Is crude oil demand recovering?

Another large weekly draw suggests that oil demand is recovering in the United States, and traders will be hoping that this will offset the impact of increased output from OPEC and its allies as production cuts are scaled back from record levels. Markets have had to rein in their expectations for demand recovery, which looks set to be weaker during the second half of the year than initially predicted.

Oil prices have also been supported by another decline in the dollar. The Dollar Index (DXY) has fallen to test 93.00 today, close to the two-year lows seen at the end of last week.

Get more analysis on oil with XRay

Visit XRay in the Marketsx trading platform to get the latest oil news and price forecasts from commodities guru Phil Carr with the weekly Oil Outlook show.

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