Oil Prices Rise on Middle East Disruptions, US Inventories in Focus
Asian Trade Sees Oil Prices Advance
Oil prices continued to rise in Asian trade on Wednesday, building on a recent rebound. Signs of supply disruptions in the Middle East persisted, while industry data indicated another week of significant builds in U.S. product inventories.
Whipsaw Start for Crude Prices
Crude prices experienced a whipsaw start to the week, dropping sharply on Monday as Saudi Arabia cut the prices on its oil sales due to weakening demand.
Rebound Amid Supply Disruptions
However, prices rebounded as hopes emerged for a tightening of oil markets with disruptions in Middle Eastern supply. The Israel-Hamas conflict and Libya’s suspension of output at its largest oilfield contributed to the optimism.
Oil Prices on the Rebound
Contracts for rose 0.3% to $77.82 a barrel, while rose 0.3% to $72.50 a barrel by 20:18 ET (01:18 GMT). Both contracts were now approaching levels seen before a sharp drop at the beginning of the week.
Concerns Over Weak Demand and Less-Tight Markets
Oil prices had experienced a drop of over 10% in 2023 due to concerns over weak demand and less-tight markets.
US Inventories and Product Stockpiles
Data from the American Petroleum Institute (API) revealed a draw of 5.2 million barrels in U.S. inventories for the week ending January 5, surpassing expectations for a draw of 1.2 million barrels.
Impact of Disruptions in the Middle East
The API data also indicated another week of strong builds in and inventories, reflecting weak demand in the largest fuel consumer. The disruptive winter storm in the U.S. further limited road travel, exacerbating the situation.
Weakening U.S. Fuel Demand
Weakened U.S. fuel demand, largely due to adverse winter weather, led to U.S. slumping to over two-year lows.
Anticipation for Official Inventory Data
The API data typically foreshadows official inventory data, due later on Wednesday. Concerns about global oil demand weakening in 2024, influenced by Saudi Arabia’s price cuts and weak economic readings from top importer China, continue to weigh on oil prices.
Additional Factors Impacting Oil Prices
Factors such as the strength of the and Chinese are also influencing oil prices, as the greenback rebounds and China’s oil imports slow down.
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