U.S. oil reserves drop more than expected

According to the Energy Information Administrations weekly oil reserves report, U.S. crude oil inventories dropped more than anticipated for a second straight week. Gasoline stockpiles also decreased, against expectations, while distillate fuel inventories gained more than projected.

On the New York Mercantile Exchange, WTI crude for August delivery traded at $105.86 per barrel at 14:50 GMT, up 2.25% on the day. Light, sweet crude hit a daily high at $105.89 per barrel minutes after the data was published, a new 14-month high. Daily low stood at $104.07. The American benchmark has advanced 2.3% so far this week after gaining 11% during the past two.

Meanwhile on the ICE, Brent oil for August delivery traded at $108.38 per barrel at 14:50 GMT, up 0.52% on the day. Prices ranged between days high and low of $108.69 and $107.72 per barrel respectively. The European benchmark has gained 0.5% over the week after advancing 6.66% during the preceding two.

In its weekly oil reserves report on Wednesday, the Energy Information Administration said U.S. Crude Oil Inventories decreased by 9.9 million barrels to 373.9 million in the week ending July 5, near the upper limit of the average range for this time of the year. Refineries operated at a 0.25% increased capacity, reaching 92.4%, the highest level since August.

Both gasoline and distillate production increased last week, averaging 9.6 million and 5 million barrels per day respectively. Gasoline stockpiles fell by 2.6 million barrels, or 1.2%, to 221 million, whereas forecasts pointed at an increase and are well above the upper limit of the average range. Distillate fuel stockpiles surged by 3 million barrels to 123.8 million, well above expectations.

EIAs report generally did not meet analysts expectations, showing a much higher drop in crude and gasoline stockpiles and gain in distillate fuel inventories. According to a Bloomberg survey, the agency’s report should have shown crude oil inventories falling by 3.1 million barrels in the week ending July 5. Gasoline stockpiles were expected to have risen by 1 million barrels and distillate fuel reserves should have gained 1 million as well. Expectations for refineries operating capacity met projections of a 0.25% increase to 92.4%.

Investors are now looking ahead into Fed’s minutes later today and Ben Bernanke’s statement, which are expected to provide further information about the central bank’s future monetary policy. After the latest FOMC meeting, Ben Bernanke said Fed’s Quantitative easing program will most probably be scaled back during the second half of the year and might come to an end by mid-2014, if all the necessary signs of consistent economic recovery are provided. If these events spur speculation over an earlier deceleration of Feds monetary stimulus, the dollar will strengthen, pressuring down oil and other dollar-priced commodities.