Adedapo Adesanya
By Adedapo Adesanya
Brent crude rose by 1.3 per cent or $1.03 on Wednesday to close at $80.58 per barrel on a bigger-than-expected US crude storage withdrawal as well as Chinese economic stimulus development, geopolitical tensions, and a weaker US Dollar.
Also, the West Texas Intermediate (WTI) crude appreciated by 1.8 per cent or $1.31 to $75.68 per barrel after the US Energy Information Administration (EIA) reported an inventory draw of 9.2 million barrels for the week to January 19 versus the draw of 2.5 million barrels for the previous week, whose effect on prices was muted, however, because of another round of substantial inventory builds in gasoline and middle distillates.
For the week of January 19, the EIA reported mixed changes in fuel inventories. Gasoline, also known as petrol, stocks added 4.9 million barrels, according to the authority, with production averaging 8.3 million barrels daily.
Meanwhile, China’s central bank, the People’s Bank of China, will cut the amount of cash that banks must hold as reserves from February 5, a move expected to shore up a fragile economic recovery.
The move will inject about $140 billion of cash into the banking system and send a strong signal of support for a fragile economy and plunging stock markets.
Meanwhile, North Dakota state officials have said it could take a month for oil output there to recover after last week’s extreme weather cut production in the US third largest oil-producing state by more than half.
Geopolitical tensions remained as the US and UK led 22 other nations to conduct new strikes against Houthi fighters in Yemen who have been attacking global trade.
The US also carried out strikes against Iran-linked militia in Iraq on Tuesday, after an attack on an Iraqi air base wounded US forces. The US said Iran-aligned Houthis have mounted 26 attacks since late November on commercial shipping in the Red Sea which was used by about 12 per cent of global oil trade before the attacks.
Support also came as the US Dollar fell to a one-week low against a basket of other currencies. A weaker Dollar makes crude cheaper for buyers using other currencies.
At its last meeting held in December, the US Federal Reserve announced that it would perform a series of interest rate cuts in the current year with its two-year battle against inflation nearly won. However, the markets don’t see the cuts coming soon.
