By Adedapo Adesanya
Oil gained on Wednesday after data showed a much larger than expected draw in crude inventories in the United States, thanks to strong export demand.
Brent crude rose by $1.73 or 1.8 per cent to $94.07 per barrel while the US West Texas Intermediate (WTI) crude rose by $2.03 cents or 2.3 per cent to $88.46 per barrel.
US crude stocks fell by 7.1 million barrels in the week to August 12 to 425 million barrels, according to data from the Energy Information Administration (EIA), beating analysts’ expectations.
Crude exports hit 5 million barrels per day in the world’s largest producer, according to EIA data, the highest on record, as it became more attractive to foreign buyers. In a sign of strong demand, fuel stocks also drew 4.6 million barrels, much higher than the expected 1.1 million barrel draw.
The American Petroleum Institute (API) on Tuesday had flagged a 448,000 barrel draw in crude stocks and 4.5 million barrels in fuel inventories.
The market was pressured by British consumer price inflation which jumped to 10.1 per cent in July, its highest since February 1982, intensifying a squeeze on households.
Still, analysts point out that the oil market is expected to stay under pressure, with fairly high volatility, due to worries over a potential global recession.
The volatility is being fed also by continued uncertainty about the Iran nuclear deal after the Middle East producer sent a written response to the EU’s latest proposal with Iranian media suggesting it won’t accept it as is.
If there is a compromise is reached, it could eventually lead to a boost in Iranian oil exports and could add one million barrels to the market.
The European Union (EU) and the US said on Tuesday they were studying Iran’s response to what the EU has called its “final” proposal to save the deal.
Another factor fuelling price volatility is the latest oil demand figures from China, which were weaker than many expected.
The new Secretary-General of the Organisation of the Petroleum Exporting Countries (OPEC), Mr Haitham Al Ghais said the rising price of crude oil is due to underinvestment in critical oil infrastructure and not a result of the group’s refusal to increase production.
OPEC had warned that there was severely limited availability of excess capacity and cautioned countries that could to use what spare capacity they had with great caution.
The cartel and its allies, OPEC+ raised its production target for September by just 100,000 barrels per day, although it is still undershooting its production quotas by millions of barrels per day.
Modupe Gbadeyanka