Oil prices continued to rise on Wednesday as industry data in the United States, the world’s largest fuel consumer, showed a sharp drop in crude inventories and worries about a hurricane in the Gulf of Mexico unsettled investors.
October Brent crude futures were up 29 cents, or 0.34%, to $85.78 a barrel as of 06:35 GMT. The October contract expires on Thursday and the more active November contract is up 31 cents at $85.22 a barrel.
West Texas Intermediate (WTI) crude futures rose 37 cents, or 0.46%, to $81.53, posting fifth-session gains.
Both indicators gained more than a dollar on Tuesday as the US dollar tumbled after expectations for rate hikes faltered after weak US jobs data.
U.S. crude inventories fell nearly 11.5 million barrels in the week ended Aug. 25, according to data from the American Petroleum Institute (API) on Tuesday. Prior to the data, analysts had forecast an average decline of 3.3 million barrels.
It is undeniable that the more-than-expected decline in US crude oil inventories is positive for the oil market, as it indicates strong demand.
At the same time, investors bought futures due to concerns about Hurricane Idalia, which is active east of major US oil and gas production fields in the Gulf of Mexico. Concerns over Hurricane Idalia led to new purchases.
According to the Energy Information Administration (EIA), the Gulf of Mexico offshore accounts for about 15% of US oil production and about 5% of natural gas production.
Now, traders are focused on the EIA data, which will be released at 14:30 GMT.
Oil giant Chevron has evacuated some of its personnel from the area, but production continued in the fields where it operates in the Gulf of Mexico.
Analysts expect the oil supply to remain tight, as Saudi Arabia, the world’s largest oil exporter, will extend its voluntary production cut through October.
Based on this expectation, refinery sources forecast that Saudi Arabia will raise the official selling prices of crude oil sold to Asia under long-term contracts to the highest level this year in October.
Meanwhile, political unrest in Gabon could affect crude oil supplies from that country and further tighten the market. Gabon exported an average of 160,000 barrels per day to Asia from May to July, according to the data.
However, concerns about fuel demand and the mixed economic situation in China, the world’s largest oil importer, are putting pressure on prices.
Meanwhile, sources stated that the Chinese economy recovered somewhat in July after the contraction in June, the various output indicators have leveled off recently and the economy could tip into a downward spiral unless policy support is ramped up soon.