Oil prices increased by more than 1% on Wednesday, recovering some losses from the previous day. This uptick was driven by a decline in U.S. crude inventories and concerns over Hurricane Francine potentially disrupting U.S. oil production, which outweighed worries about sluggish global demand.
According to data from the American Petroleum Institute (API) released on Tuesday, U.S. crude oil stocks fell by 2.793 million barrels. Gasoline inventories decreased by 513,000 barrels, while distillate stocks rose by 191,000 barrels.
At 0807 GMT, Brent crude futures were up $1.10, or 1.6%, trading at $70.29 per barrel. Meanwhile, U.S. crude futures climbed $1.11, or 1.7%, to $66.86 per barrel.
Tamas Varga, an analyst at oil broker PVM, commented, “The API report provided some relief with a significant drop in crude oil stocks, a larger-than-expected reduction in gasoline inventories, and a minor increase in distillate stocks.”
On Tuesday, both major oil benchmarks experienced sharp declines. Brent crude fell below $70 to its lowest level since December 2021, while U.S. crude dropped to its lowest since May 2023. This decline followed OPEC‘s downward revision of its 2024 oil demand growth forecast for the second time.
Analysts noted that concerns over Hurricane Francine’s impact on U.S. oil production, the world’s largest producer, also supported prices. Yuki Takashima, economist at Nomura Securities, remarked, “The market’s rebound was partly due to the substantial drop on Tuesday, coupled with fears of supply disruptions from the storm.”
The U.S. Bureau of Safety and Environmental Enforcement (BSEE) reported that approximately 24% of crude production and 26% of natural gas output in the U.S. Gulf of Mexico were offline due to the storm.
The U.S. government’s official inventory report, scheduled for release at 1430 GMT, will provide further insights. Reuters’ poll of eleven analysts estimated a rise of about 1 million barrels in crude inventories and a decrease of 100,000 barrels in gasoline stocks.
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