US Crude Inventories Drop, Oil Prices Rise 3% from Recent Lows.
Oil prices ascended by 3% on Wednesday, recovering from their multi-month lows, following data that indicated a larger-than-anticipated draw in U.S. crude stockpiles, despite ongoing concerns about weak crude demand in China.
By 11:45 a.m. EDT (1545 GMT), Brent crude futures had risen by $2.13, or 2.8%, to $78.61 per barrel. Concurrently, U.S. West Texas Intermediate crude climbed by $2.36, or 3.22%, to $75.56.
U.S. crude inventories fell for the sixth consecutive week, dropping by 3.7 million barrels to 429.3 million barrels last week, as per government data. This decrease was significantly more than the 700,000-barrel draw forecasted by analysts in a Reuters poll.
“The main takeaway here is that demand is stronger than anticipated and overall supplies are tighter,” explained Phil Flynn, an analyst at Price Futures Group. “Crude supply is below average for this time of year,” he added.
On Tuesday, industry data from the American Petroleum Institute (API) had shown an unexpected increase in crude and gasoline inventories.
On Monday, Brent hit its lowest point since early January, and WTI touched its lowest level since February, as a global stock market sell-off deepened over fears of a potential recession in the U.S. following weak jobs data.
However, both oil benchmarks ended their three-session losing streak on Tuesday.
“The rebound from Monday’s significant downturn suggests it was a brief market overreaction rather than a crash,” commented Tim Snyder, chief economist at Matador Economics.
Additionally, ongoing tensions in the Middle East continued to fuel supply concerns on Wednesday, further supporting prices. The region is bracing for potential new attacks by Iran and its allies following last week’s killing of senior members of militant groups Hamas and Hezbollah, raising fears that the conflict in Gaza could escalate into a broader Middle East war.
U.S. officials have maintained constant communication with allies and partners in the region, and there is a “clear consensus” that no one should escalate the situation, Secretary of State Antony Blinken stated on Tuesday.
“Any escalation of the conflict in the Middle East could significantly increase the risk of supply disruptions from the region,” noted ANZ analyst Daniel Hynes.
Adding to the bearish demand outlook, Chinese trade data revealed that July’s daily crude oil imports fell to their lowest level since September 2022. China remains the world’s largest crude importer.
