On Wednesday, oil prices increased on the world commodity market following data indicating a decline in US crude stocks. Although there is concern that Chinese demand may be poor, the US, the world’s largest oil consumer, is expected to have stronger demand than China.
From the closing price of $81.01 per barrel in the previous trading session, ICE Brent increased by 0.37% to $81.31 per barrel. At the same time, the U.S. benchmark West Texas Intermediate (WTI) was trading at $77.26 a barrel, up 0.39% from the previous session’s closing price of $76.96 per barrel.
Contrary to market expectations of a 2.47 million barrel draw, data released late Tuesday by the American Petroleum Institute (API) revealed a fall of 3.9 million barrels in US crude oil stockpiles.
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.
