Oil prices volatile amid mixed crude inventory data

Oil prices inched up early in early trading and then slumped as the day ended after data showed a larger-than-anticipated decrease in US crude stockpiles. Brent crude oil futures rose 16 cents to $85.60 per barrel, and the US West Texas Intermediate crude futures climbed 14 cents to $82.95 per barrel.

The advance came one day after prices fell as concerns about Hurricane Beryl acting to disrupt production in the Gulf of Mexico subsided.

According to sources citing the American Petroleum Institute, sharp declines in US crude oil inventories were 9,163,000 barrels for the week ended June 28. At the same time, gasoline inventories rose by 2,468,000 barrels, with distillate levels down 740,000 barrels. Analysts, who had predicted a more modest draw on crude inventories, indicated the figures were higher than expected.

"Oil prices were supported by a US crude inventories draw, but gains were limited as some investors were still seeking to take profits from the recent rally to reach the highest levels since April," said Mitsuru Muraishi, an analyst at Fujitomi Securities.

The Energy Information Administration is due to release its weekly data on Wednesday, which will shed more light on market dynamics.

Demand for gasoline in the US is expected to firm up, especially as the summer travel season really gets underway and the Independence Day holiday approaches. This year's holiday travel is expected to rise by 5.2 per cent over last year with car travel 4.8 per cent higher, according to American Automobile Association(AAA).

On the supply side, a Reuters survey showed that the Organisation of the Petroleum Exporting Countries'(OPEC) oil output increased for a second month in June. The rise was due to higher production from Nigeria and Iran offsetting voluntary cuts by other members of the OPEC+ alliance.

Hurricane Beryl, expected to downgrade to a tropical storm, is currently expected to move into the Gulf of Mexico this week and could also hit further dynamics.

While oil prices do respond positively to prospects for summer US demand, mixed inventory data and continual adjustments to supply from OPEC, alongside other external events such as hurricanes, will continue to remain key drivers of sentiment.