The biggest crude oil draw since 2016 was not enough to stop oil from a major drop in price. A slew of oil supply side stories includes the resumption of Libyan crude exports, an increase in Saudi Arabia crude output, possible waivers on U.S. sanctions on Iranian oil and reports that oil is on the agenda when President Donald Trump and Russian President Vladimir Putin meet next month. You also had the dollar soar and commodities tank on the fact that the Trump Administration announced new tariffs on China.

Yet, the world looks more bullish today on reports of new China and U.S. trade talks and a new commitment by NATO to raise their spending commitment to fund their fair share of NATO spending. And a report by the International Energy Agency reports that spare oil production capacity could be "stretched to the limit" by OPEC’s supply boost. In other words, down to fumes.

Let us start with the highlights from the Energy Information Administration. From a pure supply and demand aspect, it was very supportive. The EIA reported a 12.633 million barrel drop in crude supply, the biggest decrease since August of 2016. U.S. crude exports dipped but stayed near record highs. U.S. gasoline exports hit a record as our supply was sent to Europe and Africa. Supplies of gasoline fell by 694,000 barrels as refiners upped gasoline production. Refiners overall operated at 96.7% of their operable capacity last week. Gasoline production increased last week, averaging 10.7 million barrels per day. Distillate fuel production decreased last week, averaging 5.4 million barrels per day. Distillate saw a big jump in supply rising by 4.125 million barrels. U.S. crude imports fell hard by 1.624 million barrels a day.

Bottom line, the EIA report is showing a very strong U.S. and global oil market signaling that growth is still running above par, except for weaker distillate demand. Yet, that did not matter for the moment as the market dealt with a slew of bearish interpreted developments. Market Watch laid out seven reasons for the drop.

1. Libya exports set to resume   

Libya’s state-run National Oil Corp. lifted force majeure on eastern oil ports on Wednesday after the ports were handed back from an armed faction, paving the way for a resumption of full production. Bjornar Tonhaugen, vice president for oil markets at consultancy Rystad Energy AS, estimated that around 700,000 barrels of oil a day would eventually be returned to the global market from Libya.

2. Possible waivers for U.S. sanctions on Iranian oil

Recent News reports, citing an interview with Sky News Arabia, said U.S. Secretary of State Mike Pompeo suggested he will issue waivers for U.S. sanctions on Iranian oil.

3. U.S.-China trade dispute

The White House said it would assess 10% tariffs on a further $200 billion in Chinese goods, deepening the dispute with Beijing, fueling further concerns that worsening tensions between the U.S. and China will hurt the global economy, and demand for oil.

4. U.S. dollar strength

The U.S. dollar strengthened Wednesday as Trump’s protectionist trade stance lured investors to the perceived safety of the greenback. The ICE U.S. Dollar Index DXY, was up 0.6% at 94.71, trading at a more than one-week high. As oil is pegged to the dollar, a stronger greenback usually doesn’t bode well for oil buyers using other currencies. 

5. Saudi Arabia was raising output before the OPEC meeting

Saudi Arabia’s crude-oil production rose to 10.42 million barrels a day in June, up 405,400 barrels a day from May, according to a monthly report from the Organization of the Petroleum Exporting Countries released July 12. 

6. EIA sees U.S. crude output nearing 12 million barrels a day next year 

U.S. crude-oil production is set to average 11.8 million barrels a day in 2019, the EIA said in its monthly short-term report published Tuesday. That would top the previous record of 9.6 million barrels a day set in 1970. 

7. Speculation that the U.S. will pressure Russia to lift production

There are reports that President Trump will “hammer Russia” on raising oil production. The United States and Russia are scheduled to hold a summit on July 16 in Helsinki.

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