Oil prices rose nearly $1 on Wednesday as markets focused on a winter supply squeeze and a soft landing for the U.S. economy.
Brent crude futures were up 86 cents, or 0.9%, at $94.82 a barrel by 03:40 GMT, while West Texas Intermediate (WTI) crude futures were up 86 cents, or 0.9%, at $91.25 a barrel.
Industry data released Tuesday showed U.S. crude oil inventories rose by nearly 1.6 million barrels last week; This was contrary to analysts’ expectations for a decline of around 300,000 barrels.
However, markets remained concerned that crude oil inventories at the major US storage hub of Cushing, Oklahoma, were falling below minimum operating levels.
A further decline in Cushing, the delivery point for U.S. crude futures, could put new upward pressure on oil markets as it would exacerbate a supply squeeze caused by supply cuts by the Organization of the Petroleum Exporting Countries and allies.
Oil prices are relatively strong overall due to the current supply contraction. Price support from supply cuts by Russia and Saudi Arabia is expected to be limited until the end of the year.
Economic data from Europe and the USA have weakened recently. Oil prices may generally fluctuate in October. It is unlikely to break $100 in the short term, but it is still expected to be strong.
Regarding the economy in China, Evergrande, China’s construction and real estate company in debt crisis, is facing administrative and judicial investigations as well as payment difficulties.
US government data on oil stocks is expected to be released at 1430 GMT.
While some analysts expect the seasonal maintenance of refineries to help boost crude oil inventories some, others worry that higher export demand could push oil stocks back.
Russia’s recent export ban on gasoline and diesel has put upward pressure on crude oil demand from refineries.
Russia last week temporarily banned gasoline and diesel exports to all but four former Soviet states to stabilize the domestic market but later eased the restrictions.
While exports of products already accepted by Russian Railways and Transneft can continue, high-sulfur diesel and fuels used for refueling will be exempt from the ban.
Minneapolis Federal Reserve Bank President Neel Kashkari said Tuesday that a soft landing for the U.S. economy is likely, but there’s also a 40% chance that the Fed will have to raise interest rates “meaningfully” to get through it.
Kashkari put the odds at about 60% that the Fed would “potentially” raise interest rates another quarter point and then keep borrowing costs steady “long enough to bring inflation back to target in a reasonable amount of time.”
The Bank of England has completed its tightening cycle and is likely to keep interest rates at 5.25% until at least July, a poll has shown, but a significant minority said it would raise rates again this year.
Higher interest rates increase borrowing costs, which can slow economic growth and reduce demand for oil.