Oil falls as dropping risk assets outweigh signs of tight market - BNN Bloomberg

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Oil resumed a rally after an industry estimate pointed to a huge drawdown in U.S. inventories, adding to signals the market is tightening.

The American Petroleum Institute reported that nationwide crude stockpiles plunged 15.4 million barrels last week, according to people familiar with the figures. If confirmed by government dUata later Wednesday, that would be the biggest decline in volume terms in figures going back to 1982.

The API estimates also signaled another drop in crude holdings at the key storage hub of Cushing, Oklahoma, as well as declines in inventories of gasoline and distillates. Still, Fitch Ratings’ cut of its U.S. debt rating and an ADP report on private payrolls is weighing on stocks and dragging crude down as well.

Oil soared in July after the Organization of Petroleum Exporting Countries and its allies cut supplies. That spurred calls from producers including BP Plc that the market is set to strengthen in the coming months. “The visible tightness has convinced the market that announced cuts are not just empty rhetoric,” said Nitesh Shah, an analyst at WisdomTree. “Market optimism that we are nearing the end of a rate-tightening cycle and that an economic soft-landing could easily be achieved has also helped oil prices gain.”WTI for September delivery gained 0.8 per cent to US$80.69 a barrel at 10:22 a.m. in New York.Widely watched metrics are strengthening.

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