Early on Wednesday in Asian trading, oil prices increased, reversing losses from earlier in the session, as worries about restricted supply due to news of falling US stocks outweighed concerns about declining demand from one of the world’s leading oil importers China.
By 900 GMT, Brent crude futures were up 73 cents, or 0.8%, at $90.76 per barrel. U.S. West Texas Intermediate crude was up $1.13 or 1.4% to $83.95 per barrel. On Thursday, the front-month contract for WTI expires.
In the previous session, news that U.S. President Joe Biden intended to release additional barrels as from Strategic Petroleum Reserve (SPR) and concerns over waning Chinese gasoline demand caused Brent and WTI to hit two-week lows and drop 1.7% and 3.1%, respectively.
Market insiders quoting American Petroleum Institute data on Tuesday said U.S. crude oil stocks decreased by around 1.3 million barrels for the ending week of October 14.
An extended poll released on Tuesday showed U.S. crude stocks were predicted to have risen by 1.4 million barrels in the last week of October 14 for a second straight week.
The U.S. Department of Energy’s statistical division, the Energy Information Administration, is required to submit inventory data by Wednesday at 10:30 a.m. (1430 GMT).
Better risk sentiment, which was boosted by positive U.S. corporate profits and a halt in the rise in bond yields, also helped to support oil prices, according to CMC Markets analyst and specialist, Tina Teng.
As a result, Teng noted, the selloff caused by recessionary concern in the oil markets subsided.
The Organization of the Petroleum Exporting Countries (OPEC) and some other producers, including Russia, agreed earlier in October to drastically reduce oil production by 2 million barrels per day.
The decision by the group of oil producers was unanimous, according to OPEC’s secretary-general, despite charges from the White House that Saudi Arabia had pressured some countries into supporting the action.
The OPEC+ output cut, which occurs before a European Union oil embargo, will limit supply in a competitive market.
The restrictions imposed by the European Union on Russian oil will go into force in December and in February, respectively.
Furthermore, as plus to the 400,000 barrels per day (bpd) drop since February, it is anticipated that Russian production will decrease by 0.6 million barrels per day by year’s end as Europe implements its embargo on the import of Russian oil as well as a ban on essential services like shipping, insurance, and financing, according to JP Morgan analysts.
The Biden administration intends to release additional oil from the SPR to fill the shortfall and lower petrol prices ahead of next month’s midterm elections.
A senior U.S. official said the government intends to sell the final 15 million barrels of the 180-million-barrel oil release it announced earlier this year in December.
Energy dealers shouldn’t be astonished if Biden chooses to be active in accessing the SPR because the price paid at the pump serves as a crucial weekly reminder for consumers.
The EU’s emergency oil reserves, which include crude oil and petroleum goods, and petroleum modestly increased in July after two synchronized releases reduced them to record lows in June, but they remained 3.7% less than in July 2021, according to data released on Tuesday by the bloc’s statistics office.
Fears of decreased Chinese gasoline consumption as a result of China’s continued adherence to its strict zero-COVID policy restrained oil price rises.
