Oil prices trading above $74 on US inventory drop, dollar

Oil prices are trading above $74 on Wednesday, helped by industry data showing a sharp drawdown in US crude oil stocks, but the firm US dollar limited gains. Crude oil inventories in the world’s biggest oil consumer fell 3.7 million barrels last week, against analysts’ expectations of a 900,000-barrel drop, the American Petroleum Institute (API) said on Tuesday.

US crude oil futures for February edged up 6 cents to $74.46 a barrel by 0713 GMT in thin pre holiday trade, after rising 68 cents on Tuesday. US Light oil prices have gained almost $6 since hitting a more than two month low of $68.59.

“The API data is bullish and the market anticipates EIA data tomorrow to show resonably significant drawdown in the crude stocks as well as in some of the oil products stocks,” said Ben Westmore, commodities economist at National Australia Bank. “That’s sort of positive short-term sentiment.”

Oil’s recovery was curbed by the strengthening US dollar, which hit a two-month high versus the yen on positive US economic news and the steepest yield curve on record. The dollar also held firm against a currency basket, better known as the Dollar Index. Oil prices have often retreated this year when the dollar firms, making crude more costly for holders of other currencies. A stronger US dollar can also signal investors putting funds into safe havens and away from assets deemed more risky, including oil.

Tags:  inventory, oil prices, trading, US dollar