2022.05.1819:27:00UTC+00Oil Futures Pare Early Gains, Settle Sharply Lower

Crude oil futures pared early gains and settled lower on Wednesday despite data showing a drop in crude inventories in the week ended May 13.

The data also showed a fall in gasoline supplies last week.

Reports that the United States is planning to relax sanctions against Venezuela and allow Chevron Corp to negotiate oil licences with state producer PDVSA weighed on oil prices.

A stronger dollar amid rising prospects of sharper interest rate hikes by the Federal Reserve too contributed to the drop in crude oil prices.

According to reports, capacity use on both the East Coast and Gulf Coast was above 95%, putting those refineries close to their highest possible running rates.

West Texas Intermediate Crude oil futures for ended lower by $2.81 or about 2.5% at $109.59 a barrel.

Oil prices surged higher earlier in the day amid expectations of increased demand from China following the decision to ease Covid restrictions from June 1.

Data released by the Energy Information Administration (EIA) said crude inventories dropped by 3.4 million barrels last week, as against expectations for a rise of 2.1 million barrels.

Gasoline stocks fell 4.8 million barrels in the week, nearly five times more than the expected drop, while distillate supplies increased by 1.2 million barrels, against an expected drop of 1 million barrels.

On Tuesday, the American Petroleum Institute had said in its report that crude inventories in the U.S. fell 2.4 million barrels last week.