Oil Rallies On Expectation Inventories Will Drop

Oil prices strengthened Aug. 2, with U.S. crude gaining nearly 2% after traders saw an industry report suggesting domestic crude stockpiles would soon decline again after a surprise rise in the latest week.

Traders said prices rallied early when industry information provider Genscape reported that crude inventories at the Cushing, Oklahoma, delivery hub for U.S. crude dropped 1.1 million barrels (MMbbl) since July 27.

On Aug. 1, prices sank when the U.S. government reported that in the prior week, total U.S. inventories rose 3.8 million barrels, while supplies at Cushing fell 1.3 MMbbl.

“There’s an expectation that the build from this week will be gone next week,” said Phil Flynn, an analyst at Price Futures Group in Chicago. He also noted U.S. monthly production figures fell in May.