Crude oil futures trim losses after bullish U.S. supply data

Crude oil futures trimmed losses on Wednesday to move off the lowest levels of the session after a report from the U.S. government showed that oil supplies fell more-than-expected last week.

On the New York Mercantile Exchange, light sweet crude futures for delivery in September traded at USD106.49 a barrel during U.S. morning trade, down 0.3%. The September contract settled up 0.7% at USD106.83 a barrel on Tuesday.

Nymex oil prices traded at USD106.37 a barrel prior to the release of the supply data.

Nymex oil futures traded in a range between USD105.95 a barrel, the daily low and a session high of USD106.88 a barrel.

Oil futures were likely to find support at USD103.63 a barrel, the low from August 9 and resistance at USD107.23 a barrel, the high from August 6.

The U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories fell by 2.8 million barrels in the week ended August 9, compared to expectations for a decline of 1.5 million barrels. 

Total U.S. crude oil inventories stood at 360.5 million barrels as of last week. 

The report also showed that total motor gasoline inventories decreased by 1.2 million barrels, beating expectations for a decline of 0.8 million barrels.

Meanwhile, the U.S. Department of Labor said earlier that producer prices were flat last month, confounding expectations for a 0.3% increase.

The core producer price index eased up 0.1% in July, missing forecasts for a 0.2% increase.

The disappointing data raised fresh doubts over whether the economic recovery is strong enough for the Federal Reserve to begin phasing out its USD85 billion-a-month asset purchase program later this year.

Investors have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Fed to reduce its bond purchases.

Any improvement in the U.S. economy was likely to reinforce the view that the central bank will begin to taper its bond purchase program in the coming months.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

The central bank is scheduled to meet September 17-18 to review the economy and assess policy.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for September delivery inched down 0.2% to trade at USD109.60 a barrel, with the spread between the Brent and crude contracts standing at USD3.11 a barrel.

In the euro zone, preliminary data released earlier showed that the region’s gross domestic product grew by a seasonally adjusted 0.3% in the second quarter, above expectations for growth of 0.2%.

The upbeat data came after a report showed that France’s economy expanded 0.5% in the three months to June, following two consecutive quarters of contraction. Economists had forecast growth of 0.2% quarter-on-quarter.

A separate report showed that Germany’s economy expanded by 0.7% after growing 0.1% in the first quarter. Economists had forecast quarter-on-quarter growth of 0.6%.