Oil prices rose on Wednesday as fears of supply tightening countered the negative impact of uncertain Chinese demand growth and news that the United States would release more oil from its reserves.
December-ending Brent crude futures rose $1.54, or 1.6%, to $91.56 a barrel by 12:47 pm EDT (1647 GMT). US West Texas Intermediate Crude Oil (WTI)
In the previous session, the benchmark hit a two-week low following reports that President Joe Biden plans to release 15 million barrels of oil from the Strategic Petroleum Reserve (SPR). Biden is scheduled to speak at 1:15 p.m. ET (5:15 p.m. GMT) on his efforts to bring down fuel costs in the United States. Fuel costs have fallen in the last two weeks, but are still higher than they were a month ago.
US crude inventories fell unexpectedly last week – the Government Weekly showed they fell by 1.7 million barrels, defying expectations for an increase of 1.4 million barrels. SPR levels dropped by 3.6 million barrels to put him just above 405 million, the lowest since May 1984. [EIA/S]
U.S. refiners, on the other hand, have maintained higher-than-average capacity utilization this time of year, operating at 89.5% of their capacity.
“Crude took a positive turn after another unexpected drawdown in the SPR release,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “Refinery operations were stronger than expected. Supplies are still dangerously tight and should give us some support.”
A pending European Union ban on Russian crude oil and petroleum products and a 2 million bpd cut by the Organization of the Petroleum Exporting Countries and other producers, including Russia, by a group known as OPEC+ also supported prices.
EU sanctions on Russian crude oil will come into force in December and sanctions on petroleum products will come into force in February.
“Given that oil inventories are at multi-year lows, it is likely that demand growth will slow and restore the supply-demand balance to $100 a barrel in the coming months,” UBS analysts said in a note. We need to raise it further,” he said.
China postponed the release of several key economic indicators this week. It was a highly unusual move that fueled concerns about slow growth.
There were also signs of a recovery in China’s oil demand, with private mega-refiner Zhejiang Petrochemical (ZPC) and state-owned ChemChina receiving additional import quotas.
(Additional reporting by Stephanie Kelly; Editing by Margherita Choi, Paul Simao, David Gregorio)
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