Oil Prices Drop Despite Inventory Decline - Market Analysis

Oil prices slid Wednesday, even after weekly data showed inventories fell for the first time in 16 weeks.

U.S. stockpiles decreased by 745,000 barrels in the week through May 8, according to the U.S. Energy Information Administration, compared with a 4.15 million-barrel build that analysts surveyed by Refintiiv were anticipating.

Inventories had risen for 15 consecutive weeks, though prices began to rally after an agreement among energy producers to cut output prompted speculation of a longer-term rebound.

West Texas Intermediate crude oil, the U.S. benchmark, fell 1.9 percent to $25.29 a barrel. Brent crude, the international standard, dropped 2.6 percent to $29.19 a barrel.

U.S. oil stockpiles had been building over the last several months amid a price war between Saudi Arabia and Russia and as global demand was sharply reduced by stay-at-home orders aimed at slowing the spread of COVID-19.

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The world's largest producers last month agreed to production cuts that would reduce oil output by 20 million barrels per day.

The cuts went into effect on May 1 and Saudi Arabia on Monday said the kingdom would reduce its output by an additional 1 million barrels per day, lowering its daily production to about 7.5 million barrels.

West Texas Intermediate crude oil was down 58 percent this year before today.