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International oil price gains are limited, the US government stimulates oil companies to expand production

On July 27, international oil prices rose 1%, as industry data showed that U.S. crude oil inventories fell more than expected. However, concerns about weak demand limited the upside of oil prices, and expectations of sharp interest rate hikes by the Federal Reserve weighed on commodity demand. The U.S. government has continued to sell off strategic reserves, which is expected to encourage producers to expand investment.

NYMEX crude oil futures rose 1.39% to $96.29 a barrel; ICE Brent crude futures rose 1.00% to $100.46 a barrel.

The American Petroleum Institute (API) said U.S. crude inventories fell by 4.037 million barrels last week, a much larger-than-expected drop of 1.121 million barrels. But the Fed is expected to announce a 75 basis point rate hike at the end of its policy meeting, underscoring concerns about the outlook for energy demand. A stronger dollar is expected to make dollar-denominated commodities more expensive for holders of other currencies.

"The sharp drop in inventories should support oil prices, but the rebound was limited by concerns about weak underlying demand, and the White House said it would further release strategic reserves," said Leon Li, an analyst at CMC Markets. He also said the prospect of a sharp Fed rate hike weighed on sentiment And limit the rise in oil prices.

The Biden administration said on Tuesday that it would sell another 20 million barrels of oil from the country's strategic reserves as part of a previously announced plan. The sell-off is aimed at quelling a surge in oil prices due to a post-pandemic demand recovery and the conflict between Russia and Ukraine.

The U.S. government said in late March that it would release a record 1 million barrels per day (bpd) of oil from the strategic reserve in six months. At present, the United States has sold 125 million barrels of oil from strategic reserves, and nearly 70 million barrels have been delivered.

Currently, the US Strategic Petroleum Reserve has fallen to 475.5 million barrels, the lowest level since June 1985. "This in practice means that producers have more certainty about future demand for their products, which will encourage them to expand investment," a senior U.S. official told reporters.

U.S. oil production will rise from about 11.2 million bpd in 2021 to more than 11.9 million bpd in 2022, the U.S. Energy Information Administration (EIA) said this month. Production will reach nearly 12.8 million bpd by 2023, surpassing the record of nearly 12.3 million bpd set in 2019.

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