Oil Prices Rise as US Crude Inventories Fall Sharply
Oil prices rose in the global commodity market on Wednesday after data showed US crude inventories shrank. There is fear that Chinese demand would be weak, but this has been overtaken by demand expectation in the US, the world’s largest oil consumer.
ICE Brent rose 0.37% to $81.31 per barrel from the closing price of $81.01 per barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $77.26 per barrel at the same time, a 0.39% rise from the previous session that closed at $76.96 per barrel.
Data released by the American Petroleum Institute (API) late Tuesday showed a decrease of 3.9 million barrels in US crude oil inventories, against market predictions of a 2.47 million barrel draw.
Supply concerns triggered by wildfires in Alberta, Canada, also supported price increases. Wildfires are threatening more than 10% of the region’s oil production, according to Daniel Hynes, a commodity strategist at the Australia and New Zealand Banking Group.
‘Suncor Energy and Altair Energy have already been forced to curtail output as the wildfires overran the facilities,’ Hynes said in an e-mailed note.
However, slower-than-expected economic growth in China, the world’s largest crude oil importer, continues to weigh oil prices down after the figures sparked concern last week over the country’s crude demand.
Cease-fire efforts in the Middle East, home to a vast majority of global oil reserves, also put downward pressure on oil prices by relieving market players’ supply concerns.
Yesterday, Oil prices came under further pressure despite supply risks from Canada. Constructive fundamentals suggest the move lower is overdone, said ING in a note.
ICE Brent settled 1.69% lower on the day leaving it just above US$81 and the weakest level since early June. Weak Chinese demand adds to the concerns for the market.
Price action in early morning trading today has been more constructive, commodity strategists said. This is after API data overnight showed that US crude oil inventories fell by 3.86 million barrels over the last week, more than the roughly 2.8 million barrel draw the market was expecting.
In addition, declines were also seen on the product side. Gasoline and distillate inventories fell by 2.77 million barrels and 1.5 million barrels respectively. The more widely followed EIA inventory report will be released later today. AfDB Expresses Support for African Union Peace Fund Revitalization
