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Crude oil has been able to power through the $40 handle today ahead of the US EIA crude oil inventories data, following a forecast-beating draw revealed by the American Petroleum Institute.

The latest API report estimated an 8.156 million barrel draw from US oil stocks last week, smashing forecasts for a draw of 710,000 barrels.

If accurate, it will be the largest draw of 2020 so far. Gasoline stocks also fell more than expected, with a draw of 2.459 million barrels last week, down from the previous week’s 3.856 million barrel drop, but still almost one million barrels higher than analysts had predicted.

US oil inventories report boosts oil after indecisive session

West Texas Intermediate crude oil had tumbled through the $40 handle to close at $38 per barrel on June 24th. Since then the benchmark has recovered, with yesterday’s API data helping oil gain around $0.60, or 1.6%. Yesterday’s indecisive trading saw prices briefly rise above $40 before retreating to close virtually flat at $39.60.

Brent oil has risen $0.60, or 1.5%, today to trade above $42 for the first time in five days.

The huge draw was some welcome news for oil bulls, after the commodity had been stuck trading sideways in line with other markets as investors struggled to weigh up improving economic data and rising numbers of coronavirus infections.

The API data has given crude oil fresh impetus on a day that could otherwise have seen more range bound trading.

On a positive note, the Chinese Caixin Manufacturing PMI beat expectations, rising from a revised 50.7 to hit 51.2 in June, against forecasts of 50.5.

But on the other hand, the US has recorded its biggest single day spike in cases since the pandemic started after reporting 47,000 new Covid-19 infections, raising fears that parts of the economy may have to be shuttered again to prevent further spread, which would hamper the recovery and dent the outlook for the oil demand.

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