Oil prices up on lower-than-expected US stockpile, jobs data easing prospects of further rate hikes
ALBAWABA – Oil prices rose on Wednesday after industry data showed United States (US) crude inventories running lower amid tighter supply concerns, news agencies reported.
Brent crude futures for October climbed $0.29 cents to $85.78 per barrel by 0635 GMT, according to Reuters, and West Texas Intermediate (WTI) crude futures rose $0.37 to $81.53.
Meanwhile, the more active Brent futures’ November contract rose $0.31 to $85.22 a barrel, as the October contract expires on Thursday.
Notably, WTI logged its fifth session of gains, Reuters reported.
A weaker dollar bodes well for stronger demand prospects driving oil prices - Shutterstock
Both benchmarks rallied more than a dollar on Tuesday as the US dollar slid on prospects of further interest rate hikes easing in light of a softer US labor market report.
Firm demand bolster oil prices
On the other hand, US crude stocks declined by about 11.5 million barrels in the week ended August 25, according to market sources citing American Petroleum Institute figures on Tuesday. Analysts polled by Reuters ahead of the data release had estimated on average a draw of 3.3 million barrels.
The bigger-than-expected draw in US crude oil stockpiles also helped bolster oil prices with prospects of strong demand, Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd., told Reuters.
Oil prices are affected by supply and demand predictions and currency strength - Shutterstock
If confirmed by official data later Wednesday, it would be the sixth drop in seven weeks, according to Bloomberg.
On the eastern front, broader markets were stronger on new China stimulus, with more expected to come in soon, Bloomberg reported.
Strong demand in the US and China will likely outweigh signs of easing crude supply flows after seaborne flows from Russia hit an eight-week high, according to Bloomberg.
Tighter supply concerns drive oil prices
In OPEC+ member state Gabon, concerns over the suspension of democracy and reported gunfire in the capital, according to Agence France-Presse (AFP), also helped the rise in oil prices.
So far, however, there have been no reports of interruption to crude output or exports, as reported by Bloomberg.
The Organization of Petroleum Exporting Countries and its allies (OPEC+) have instituted multiple cuts this year to boost oil prices. Some of these cuts, from Saudi Arabia and Russia, will carry through September, Riyadh confirmed earlier, noting that cuts could run through October as well, if needed.
In the meantime, "concerns over Hurricane Idalia prompted fresh buying," said Tazawa.
The offshore Gulf of Mexico accounts for about 15 percent of US oil output and about 5 percent of natural gas production, according to the Energy Information Administration (EIA).
Oil supply will likely remain tight as analysts expect Saudi Arabia, the world's biggest oil exporter, to extend its voluntary output cut into October.
China oil exports from Iran are expected to reach multiple-year highs in 2023 - Shutterstoc
However, news agencies have reported the possibility of the US easing sanctions on Iran and Venezuela to relieve the oil markets. In addition to anticipations of Turkey and Iraq resuming oil exports through the disputed pipeline, after repairs are done.
Refining sources surveyed by Reuters forecast that Saudi Arabia will raise its official selling prices for crude sold to Asia under long-term contracts in October to the highest this year.
Market metrics point to a positive picture, according to Bloomberg. The difference between Brent’s two nearest December contracts is closing at $5 a barrel in backwardation, compared to less than $2 a barrel, just over two months ago.
