US gasoline and distillate stockpiles fall, the dollar weakens, and oil prices rise
Oil prices rebounded slightly on Wednesday, pointing to strong fuel demand in the US, breathing in after a 5% drop the day before amid rising Chinese COVID-19 concerns and fear of demand suffering from central bank rate hikes.
West Texas Intermediate (WTI) crude futures rose 85 cents, or 0.9%, to $92.49 a barrel as of 0456 GMT, after falling $5.37 in the previous session amid recession fears.
Brent crude futures for October, which expired Wednesday, rose 70 cents, or 0.7%, to $100.01 a barrel, cutting back Tuesday's $5.78 loss. The more active November contract rose 93 cents, or 1%, to $98.77 a barrel.
Since the Ukraine conflict began six months ago, price fluctuations have rattled hedge funds and speculators and reduced trade, further whipping the market as seen on Tuesday.
US gasoline and distillate stocks are falling. The data supporting the market sentiment of the American Petroleum Institute (API) showed gasoline inventories dropped by about 3.4 million barrels in the week ended Aug 26th, while distillate stocks, which include diesel and jet fuel, fell by about 1.7 million barrels.
The decline in gasoline inventories nearly tripled the 1.2 million-barrel drop some analysts had expected on average. They had expected a decrease of about 1 million barrels for distillate stocks.
However, API data showed crude inventories increased by about 593,000 barrels, against analysts' estimates of a decline of around 1.5 million barrels.
The dollar also supported the market as oil became cheaper for buyers of other currencies as the US dollar depreciated.
The price hikes were capped by concerns that some of China's largest cities - from Shenzhen to Dalian - are closing curfews and businesses to curb COVID-19 at a time when the world's second-largest economy is already experiencing weak growth.
On the supply side, three sources told on Tuesday that oil exports from Iraq were unaffected by years of violence in Baghdad. Clashes eased on Tuesday after powerful cleric Muqtada al-Sadr ordered his followers to end their protests.
The main factor supporting prices right now is the talk of OPEC+ allies that they can cut production to stabilize the market.
OPEC+ will meet on September 5th.
As the recession threat seems real, investors are speculating that Brent will be willing to stay between $90 and $110 for now.
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