Oil Crawls Back Up On Signs Of Firm U.S. Fuel Demand

Oil prices rose marginally on Wednesday as statistics suggested to robust fuel consumption in the United States, bringing some relief after a 5% decline on Tuesday due to concerns that demand would suffer from increased China COVID-19 restrictions and central bank interest rate hikes.

A somewhat weaker U.S. dollar also bolstered the market, making oil cheaper for purchasers using other currencies.

At 03:06 GMT, U.S. West Texas Intermediate (WTI) crude CLc1 futures increased 90 cents, or 1%, to $92.54 a barrel, after falling $5.37 per barrel in the prior session due to recession fears.

Brent crude LCOc1 October futures rose 70 cents, or 0.7%, to $100.01 a barrel, erasing Tuesday's $5.78 decline. The more actively traded November contract LCOc2 rose 96 cents, or 1 percent, to $98.80 per barrel.

Since the Ukraine crisis began six months ago, price fluctuations have unsettled hedge funds and speculators and reduced trade, which, as witnessed on Tuesday, has made the market considerably more volatile.

Vivek Dhar, a commodities analyst at Commonwealth Bank, stated, "I cannot emphasize enough that the lack of liquidity portends volatility."

The American Petroleum Institute (API) said that gasoline inventories declined by approximately 3.4 million barrels and distillate stockpiles, which include diesel and jet fuel, fell by approximately 1.7 million barrels for the week ending August 26 API/S.

The decrease in gasoline inventories was nearly three times greater than the average decrease of 1.2 million barrels predicted by eight analysts surveyed by Reuters. They had anticipated a 1 million-barrel decline in distillate stocks.

In contrast to analysts' forecasts of a decline of approximately 1.5 million barrels, API data revealed a rise of approximately 593,00 barrels in oil inventories.

Concerns that several of China's largest cities, like Shenzhen and Dalian, are enforcing lockdowns and company closures to combat COVID-19 at a time when the world's second-largest economy is already experiencing sluggish growth limited price rises.

Analysts from ANZ Research stated in a note that worsening COVID-19 outbreaks in China have a negative effect on sentiment.

Three sources told Reuters on Tuesday that Iraqi oil exports were untouched by the worst violence seen in Baghdad in years. After influential cleric Moqtada al-Sadr ordered his followers to end their rallies, violence subsided on Tuesday.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies (together referred to as OPEC+) have suggested that they may reduce supply to stabilize the market, which is currently the primary factor supporting prices. OPEC+ is scheduled to meet again on September 5.

The Top Risk-Free Investments For 2022

"They'll jawbone," Dhar said. "They will attempt to demonstrate that futures prices do not reflect genuine scarcity. However, getting everyone to agree to reduce output is another obstacle."