Oil prices ticked higher by approximately 1% on Wednesday, rebounding from a five-month low in the previous session, driven by a notably larger-than-expected withdrawal from U.S. crude storage.
Brent Futures Gain 78 Cents Amid US Storage Withdrawal.
US Storage Withdrawal Impact: The U.S. Energy Information Administration (EIA) revealed a significant drawdown of 4.3 million barrels by Dec. 8. This exceeded analyst forecasts and API reports, contrasting with last year’s increase and a minimal five-year average rise
Phil Flynn, an analyst at Price Futures Group, highlighted the EIA report’s greater support compared to the previous day’s API report, emphasizing the “larger than expected drawdown in crude oil supplies.”
By 10:43 a.m. EST (1543 GMT), Brent futures had climbed 78 cents (1.1%) to $74.02 a barrel, while U.S. West Texas Intermediate (WTI) crude saw a 75-cent increase (1.1%) to reach $69.36.
Tuesday’s lowest close, driven by US storage withdrawal.
Tuesday marked the lowest closing point for both Brent and WTI since June 27, even though both futures were in contango through at least June. Analysts noted the bearish implications of contango, with prices in later months exceeding those in earlier months, potentially prompting marketers to purchase oil at current prices for storage and later resale at higher prices.
Factors such as concerns about the global economy in the coming year, OPEC+’s tepid commitment to output cuts, and increased production, especially record levels in the United States, are exerting downward pressure on prices as the year draws to a close, according to Craig Erlam, senior market analyst UK & EMEA at OANDA.
In its latest monthly oil market report, OPEC attributed the recent crude price decline to “exaggerated concerns” about oil demand growth, maintaining its forecast for world oil demand growth at 2.25 million barrels per day (bpd) for 2024.
Elevated interest rates.
Later on Wednesday, market attention turned to the U.S. Federal Reserve’s (Fed) latest policy decision, with expectations leaning toward no change in interest rates for a third consecutive time. Higher interest rates, which have been increased several times since March 2022, can elevate borrowing costs for consumers, potentially slowing economic growth and demand for oil.
Market strategist Yeap Jun Rong from IG International pointed out that markets have priced in “aggressive rate cuts” for 2024, and any deviation from this expectation could impact the U.S. dollar, influencing the risk environment and, consequently, oil prices.
Exports of hydrocarbons.
On a global scale, nearly 200 nations reached an historic deal at the COP28 conference to begin reducing the global consumption of fossil fuels. This development aimed to signal to investors in oil and other fossil fuels, with Saudi Arabia’s energy minister stating that the deal would not affect the Kingdom’s hydrocarbon exports.
In the Middle East, Israel announced its intention to persist with its war in Gaza, irrespective of international backing, following a United Nations resolution calling for a ceasefire.
Heating Oil News Writer Christine Hills
