Oil pushes higher on massive U.S. inventory draw, economic fears linger

Investing.com– Oil prices rose in Asian trade on Wednesday as industry data signaled a sharp drop in U.S. inventories, heralding tighter supplies, although concerns over slowing economic growth and a U.S. debt default still persisted.

Data from the (API) showed that U.S. inventories shrank at their fastest pace in nearly six months over the past week, as gasoline demand heats up ahead of the travel-heavy summer season.

The reading usually heralds a similar reading from due later in the day, and, coupled with signs disruption in U.S. crude supplies, points to tighter oil markets in the coming days.

rose 1% to $77.78 a barrel, while rose 1.3% to $73.91 a barrel by 21:41 ET (01:41 GMT). 

Both contracts rose sharply over the past two sessions, tracking a spike in U.S. as markets bet on increased fuel consumption in the summer season. U.S. gasoline futures surged 2% to a five-week high after the API data. 

A warning from the Saudi Arabian energy minister against shorting oil also pushed up prices. This came as the effects of recent production cuts by the OPEC began to be felt, which, coupled with signs of increasing demand, pushed up expectations of a near-term supply crunch.

But on the other hand, signs of worsening economic conditions continued to trickle in. Weaker-than-expected manufacturing activity readings from the , and the signaled more economic pain in the coming months, especially as industrial production slows.

The data follows weaker-than-expected readings released earlier this month, which pointed to a slowing economic rebound in the world’s largest oil importer.

Negotiations between Democrat and Republican lawmakers continued on Tuesday, but both parties offered little cues on when a deal could be reached. This comes just before a June deadline for a U.S. default, which could have far-reaching consequences for the global economy.

Crude prices are still trading down about 6% for the year, hit largely by concerns that worsening economic conditions will stymie a recovery in demand. 

A stronger also weighed on crude, as markets awaited more cues on monetary policy from the minutes of the Federal Reserve’s May meeting, due later in the day. 

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