Oil rises on unexpected U.S. inventory drawdown, Chinese demand optimism

By Ambar Warrick

Investing.com– Oil prices rose on Wednesday after data suggested U.S. crude oil inventories unexpectedly fell the previous week, though gains were limited as markets retreated ahead of an interest rate hike widely anticipated by the Federal Reserve.

Still, crude markets were posting strong gains from Tuesday amid rumors that China plans to scale back its strict zero COVID policy by March 2023.

The data of the American Petroleum Institute (API) showed that US crude inventories fell 6.5 million barrels in the week to October 28, far more than estimates for an increase of 267,000 barrels and an increase of 4.5 million barrels the previous week.

This decision heralds a similar decline official government figures expected later Wednesday, which is expected to show crude inventories rose 367,000 barrels last week.

API data indicates demand for crude remains stable in the world’s largest economy despite pressure from rising inflation and high interest rates.

Gasoline demand in the United States, in particular, has improved in recent months as prices have retreated from record highs. Data released this week also pointed to some strength in the US economy.

Brent oil futures rose 0.4% to $95.05 a barrel at the start of Asian trading, while West Texas Intermediate crude futures rose 0.7% to 88, $98 a barrel. Both contracts rose this week on hopes that Chinese demand will improve in the coming months, amid rumors the country plans to relax its zero-COVID policy. But Chinese officials have denied considering such a move.

Lower demand in China, due to a series of COVID-related lockdowns this year, has weighed heavily on crude prices. Rising interest rates in the United States and other major economies have also stifled economic activity, hampering demand for rough.

Investors are awaiting more details on this subject following the conclusion of a Fed meeting later in the day. The central bank is expected to raise interest rates by 75 basis points, while its comments on a possible dovish pivot will be closely watched.

Oil was also supported by bullish signals from the Organization of the Petroleum Exporting Countries this week. The cartel expects global oil demand to peak much later than expected.

OPEC also said it stood ready to support prices with more supply cuts if needed.

Related Articles

Oil rises on unexpected U.S. inventory drawdown, Chinese demand optimism

Brazilian Bolsonaro does not give in to Lula, but allows the transition

UAE and US strike deal for $100 billion in clean energy projects