Oil prices rise after drop in inventories and positive demand outlook
Oil prices rose Wednesday after industry data showed a larger-than-expected drop in crude inventories in the United States, the world's largest oil consumer, and on expectations that demand will pick up as the vaccine becomes more widely available.
However, the decline in China's crude oil productivity in August capped oil price gains as daily refinery operation hit the lowest level since last May and overall factory output fell.
Brent crude rose 49 cents, or 0.7 percent, to $74.09 a barrel, while West Texas Intermediate (WTI) crude rose 48 cents, or 0.7 percent, to $70.94 a barrel.
U.S. stocks of crude oil, gasoline and distillate all fell last week after Hurricane Ida shut down many refineries and offshore drilling production, according to Tuesday's American Petroleum Institute figures. Crude inventories fell 5.4 million barrels in the week ended Sept. 10. Analysts had expected a decrease of 3.5 million barrels on average.
EIA inventory data will be released at 1430 GMT on Wednesday.
The impact of Hurricane Ida has been much greater than many expected, and production in the Gulf of Mexico region may have trouble returning until the torrential rains brought by tropical storm Nicholas to the region are over.
Tropical storm Nicholas came just two weeks after Hurricane Ida disabled significant refining capacity on the Gulf Coast. It moved slowly along the Gulf Coast on Tuesday, leaving hundreds of thousands of homes and businesses without power despite Texas refineries continuing to operate.
The oil market continues to run short and supply disruptions in the US are supporting prices in the short term.
Vaccines will not let the demand pent-up for oil. The International Energy Agency (IEA) said on Tuesday that after a three-month decline in global oil demand due to the spread of the Delta variant of the coronavirus and renewed pandemic restrictions, vaccine applications will support the recovery.
As the effects of the next wave are discussed, optimism is growing that each coronavirus wave will be less severe as more countries get vaccines.
China's plans to sell crude from its strategic reserves have depressed prices. China will hold its first state crude oil reserves tender on September 24. State reserves administration announced on September 24 that it will auction 7.4 million barrels of crude oil.
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