WTI Crude Oil climbs as EIA inventory draw and weaker Greenback fuel recovery

• WTI crude oil rises over 1% on Wednesday, recovering from a five-day low.
• EIA reports a 2.39M barrel draw, larger than forecast, but softer than last week's sharp decline.
• A softer Greenback and resilient demand underpin the recovery after Tuesday's steep 2.27% fall.

WTI (West Texas Intermediate) Crude Oil is rebounding on Wednesday after a sharp 2.27% drop in the previous session. At the time of writing, the US benchmark trades near $64.00 per barrel, up 1.2% on the day and recovering from a five-day low of $62.80 hit earlier in European trading hours.

The rebound has been driven by a combination of a weaker US Dollar (USD) and stronger-than-expected US inventory data. The Greenback pulled back from recent highs, easing pressure on dollar-denominated commodities, while the Energy Information Administration (EIA) reported another drawdown in stockpiles, pointing to resilient fuel demand ahead of the Labor Day driving season.

Fresh EIA figures showed that crude inventories fell by 2.39 million barrels in the week ending August 22, compared with expectations of a 2.0 million draw. Although smaller than the hefty 6.01 million-barrel decline reported in the prior week, the latest numbers still underscored tightening supply. Storage at Cushing, Oklahoma, slipped by 838,000 barrels, while both gasoline and distillate inventories also declined, reflecting solid consumption trends.

The drawdown comes as refiners gear up for the peak of the US summer driving season, with fuel demand typically elevated through the Labor Day holiday in early September. The report also highlighted that US crude demand rose to 9.24 million barrels per day, up from 8.84 million in the previous week. Distillate demand improved as well, reinforcing the outlook for robust refined product consumption. Together, these signals suggest that refiners and end-users are drawing down inventories at a faster pace, offsetting concerns of slowing global demand.

Beyond US fundamentals, traders are also digesting fresh trade tensions after Washington's additional 25% tariff on Indian goods took effect today, effectively doubling the overall levy to 50%. The move, aimed at punishing India for its continued imports of discounted Russian Crude, casts another layer of uncertainty over global trade flows. While India is expected to maintain its energy strategy and keep buying from Moscow, the tariffs risk straining bilateral ties and complicating global demand dynamics.

Looking ahead, market participants remain cautious despite the rebound, as supply developments and trade tensions continue to drive short-term volatility. However, the prospect of lower US interest rates is emerging as a supportive factor. Expectations grew after Federal Reserve (Fed) Chair Jerome Powell's Jackson Hole remarks, with traders now pricing in an 87% probability of a 25 bps rate cut in September, according to the CME FedWatch Tool. Lower borrowing costs could stimulate economic activity, in turn bolstering demand for Oil.