Crude oil prices climbed higher on Wednesday, lifted by data showing a bigger-than-expected drop in gasoline inventories in the U.S. in the week ended August 5th.
A weak dollar and data showing increased demand for gasoline contributed as well to the surge in oil prices.
The dollar tumbled after data from the Labor Department showed its consumer price index was unchanged in July after jumping by 1.3% in June. Economists had expected consumer prices to edge up by 0.2%.
Compared to the same month a year ago, consumer prices in July were up by 8.5%, reflecting a bigger than expected slowdown from the 9.1% spike in June.
The annual rate of price growth was expected to slow to 8.7% from the four-decade high seen in the previous month.
With the tamer than expected inflation data raising speculation that the Fed will slow the pace of interest rate hikes at its September meeting, the dollar shed ground against its peers.
The dollar index dropped to a low of 104.64 and despite recovering to 105.02, remains deep down in negative territory with a loss of about 1.25%.
West Texas Intermediate Crude oil futures ended higher by $1.43 or about 1.6% at $91.93 a barrel.
Brent crude futures settled at $97.40 a barrel today, gaining $1.09 or about 1.1%.
Data from Energy Information Administration (EIA) said crude oil inventories jumped by 5.458 million barrels last week, as against expectations for a rise of 73,000 barrels.
Gasoline stockpiles dropped by 4.978 million barrels last week, substantially larger than the expected drop of 633,000 barrels, while distillate stockpiles increased by 2.166 million barrels last week.
The EIA data also showed an outflow of 5.3 million barrels from the US emergency oil reserve last week, resulting in the balance in the Strategic Petroleum Reserve dropping to 464.6 million barrels, the lowest level since April 1985.
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