Oklahoma, Aug. 31 (BNA): Oil prices rebounded slightly on Wednesday as data pointed to strong fuel demand in the United States, providing relief after a 5% drop the previous day on concerns that demand will suffer from China’s increasing restrictions on the spread of the virus. Novel Corona. Raising interest rates by the central bank.
US West Texas Intermediate crude futures jumped 85 cents, or 0.9 percent, to $92.49 a barrel at 04:56 GMT, after falling $5.37 in the previous session, driven by recession fears.
Brent crude futures for October, due to expire on Wednesday, rose 70 cents, or 0.7%, to $100.01 a barrel, trimming Tuesday’s $5.78 loss. The most active contract for the month of November rose 93 cents, or 1%, to $98.77 a barrel.
Price volatility since the conflict in Ukraine began six months ago has rocked hedge funds and speculators and sluggish trading, which in turn has sent the market down even more, as seen on Tuesday.
“I can’t confirm, lower liquidity means we are on our way to some choppy moves,” said Vivek Dar, commodities analyst at Commonwealth Bank.
Supporting market sentiment on Wednesday, data from the American Petroleum Institute (API) showed gasoline stocks fell by 3.4 million barrels, while distillate stocks, which include diesel and jet fuel, fell by 1.7 million barrels for the week ending August 26.
The drop in gasoline stocks was nearly three times what eight analysts polled by Reuters had forecast, on average, by 1.2 million barrels. For distillate stocks, they were expecting a drop of about 1 million barrels, according to Reuters.
However, data from the American Petroleum Institute showed that crude stocks rose by about 593,000 barrels, against analysts’ estimates of a decline of about 1.5 million barrels.
The weakness of the US dollar also supported the market, thus oil became cheaper for buyers holding other currencies.
Price gains have been capped by concerns that some of China’s largest cities – from Shenzhen to Dalian – are imposing lockdowns and business closures to curb COVID-19 at a time when the world’s second-largest economy is already struggling with weak growth.
On the supply front, three sources told Reuters on Tuesday that oil exports from Iraq were not affected by the worst violence in Baghdad in years. The clashes subsided on Tuesday after cleric Moqtada al-Sadr ordered his followers to stop their protests.
The main factor supporting prices at the moment is talk from members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, together called OPEC+, that they may cut production to stabilize the market. It is scheduled to meet OPEC + on the fifth of September.
“With regard to the OPEC cuts, I don’t think anyone believes that immediate cuts will have significant effects,” said Sukrit Vijayakar, director of energy consultancy Trifecta.
Second, since the threat of a recession appears real, investors will be willing to allow Brent crude to swing between $90 and $110 for the time being, he added.
HF