Oil prices rose on Wednesday after industry data showed a more-than-expected drop in US oil stocks and signaled strong demand from the world’s largest oil consumer, but gains were limited by concerns about interest rate hikes.
Brent crude futures rose 34 cents or 0.47%, at 0626 GMT to $72.60 a barrel, while West Texas Intermediate (WTI) futures gained 26 cents, or 0.38%, to $67.96 a barrel.
Both contracts had fallen by about 2.5% in the previous session on signals that central banks’ rate hikes would not stop.
Tuesday’s drop has brought Brent and WTI closer to the support levels they have held on to throughout the price declines of the past few months. The ground is being retested, it is not yet clear whether the prices will hold here.
Brent’s semi-annual spread, a price structure where early-loaded contracts traded above late-loaded contracts, was at a six-month low. But the two-month spread was in the opposite price position called contango.
An enlarging contango at the immediate end and a weakening pullback along the Brent and WTI forward curves indicate the market’s perception of oversupply is increasing.
Crude oil inventories fell by about 2.4 million barrels in the week ending June 23, according to data from the American Petroleum Institute (API) industry group, according to market sources. Analysts had expected a decrease of 1.76 million barrels. The US government’s EIA data on stockpiles will be released on Wednesday.
On the demand side, European Central Bank President Christine Lagarde said on Tuesday that persisting high inflation will require the bank to continue with rate hikes. Higher interest rates may put pressure on economic activity and oil demand.
The rise in US consumer confidence in June raised market concerns that the Federal Reserve will likely have to continue raising interest rates.
Analysts say markets are struggling to shake off fears that higher interest rates will put pressure on global growth and oil demand.
However, the tightening is expected to continue in the second half of 2023 due to the upward contribution of the supply cuts from Saudi Arabia, which has been effective since July, to prices from current levels.
Separately, Russia’s energy ministry said it has not seen a shortage of gasoline in the domestic market, as companies cut exports and increased production after gradually completing planned maintenance work.
The energy ministry added that at the end of June, diesel fuel production increased by 2% compared to the same period last year, and stocks were at a historic peak.
Annual profits by industrial firms in China extended double-digit declines in the first five months as softening demand squeezed margins and bolstered hopes for more policy support to support the post-COVID economic recovery.
