WTI oil futures rise 1% on bets for U.S. supply drop

Investing.com - West Texas Intermediate oil futures pushed higher on Wednesday, amid speculation weekly supply data due later in the session will show U.S. crude inventories fell at a faster pace than expected last week.

On the New York Mercantile Exchange, crude oil for July delivery tacked on 78 cents, or 1.35%, to trade at $58.77 a barrel during European morning hours. Prices held in a range between $58.11 and $58.73.

A day earlier, Nymex oil plunged $2.25, or 3.74%, to end at $57.99, as a broadly stronger U.S. dollar weighed.

Wednesday's government report was expected to show that U.S. crude oil stockpiles fell by 1.0 million barrels last week, while gasoline stockpiles were forecast to increase by 0.8 million barrels.

After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories dropped by 5.2 million barrels in the week ended May 15.

U.S. oil futures have been well-supported in recent weeks as an ongoing collapse in rigs drilling for oil in the U.S. added to expectations that shale oil production has peaked and may start falling in the coming months.

According to industry research group Baker Hughes (NYSE:BHI), the number of rigs drilling for oil in the U.S. fell by 8 last week to 660, the 23rd straight week of declines and the lowest level since September 2010.

Oil traders have been paying close attention to the shrinking rig count in recent months for signs it will eventually reduce the glut of crude flowing into the market.

But market analysts also warned that the recent rally in the oil market could prompt some producers to dial up their output if prices hold above more than $60 a barrel.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for July delivery advanced 94 cents, or 1.47%, to trade at $64.96 a barrel. On Tuesday, Brent prices lost $2.25, or 3.4%, to close at $64.02.

The spread between the Brent and the WTI crude contracts stood at $6.19 a barrel early on Wednesday, compared to $6.03 by close of trade on Tuesday.

Meanwhile, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.3% to hit 95.67 early on Wednesday.

The greenback was boosted after data on Tuesday showed that U.S. housing starts in April rose to the highest level in nearly seven-and-a-half years, while building permits also jumped.

The upbeat data boosted hopes for a rebound in second quarter economic growth after a sharp slowdown in the first three months of the year.

Market players looked ahead to the minutes of the Federal Reserve’s April meeting, due for release later Wednesday, as well as a speech by Fed Chair Janet Yellen on Friday, for fresh indications on the timing of an initial rate hike.