By Adedapo Adesanya
The prices of oil increased on Wednesday for a second day, rebounding from recent losses as the US Dollar eased off recent gains and fuel inventory figures dropped.
Brent crude futures improved by $3.05 or 3.5 per cent to $89.32 per barrel, and the US West Texas Intermediate (WTI) crude futures rose by $3.65 or 4.7 per cent to $82.15 a barrel.
The US Dollar hit a fresh two-decade peak against a basket of currencies on Wednesday before pulling back.
A strong greenback reduces demand for oil by making it more expensive for buyers using other currencies. The Dollar index was down 0.9 per cent.
US inventory figures showed consumer demand rebounded, though refining product supplied remained 3 per cent lower over the last four weeks than a year ago.
On Wednesday, the Energy Information Administration reported a crude oil inventory draw of 215,000 barrels for the week to September 23. The previous week has seen a 1.1-million-barrel build on inventories.
The surprise draw Wednesday came after the American Petroleum Institute (API) had estimated a 4.15-million-barrel build for the week to September 23, catching the market off guard.
Meanwhile, gasoline inventories declined by 2.4 million barrels and distillate inventories by 2.9 million barrels, as refining activity declined following several outages.
Also contributing to the surge in oil prices was the 11 per cent of output shuttered in the Gulf of Mexico as Hurricane Ian made its way toward the Florida coast.
Goldman Sachs cut its 2023 oil price forecast on Tuesday due to expectations of weaker demand and a stronger US Dollar but said global supply disappointments only reinforced its long-term bullish outlook.
Oil prices have been on the slide in the past few days as aggressive US Federal Reserve policy sent the Dollar soaring. However, prices have started reversing the trend prompted by the shutdown of offshore production in the Gulf of Mexico ahead of Hurricane Ian.
Expectations that the Organisation of the Petroleum Exporting Countries and allies (OPEC+) will agree to oil production cuts at its next meeting next week also served to lend some support to oil prices in the past few days.
OPEC’s latest production figures showed the total was 3.58 million barrels per day below targets; Russia’s exports are seen dropping by 2.4 million barrels per day next year, and US producers are staying cautious about production growth.
On the bearish side, a recession could offset much of the bullish potential, and analysts see the chances of a recession in the US at between 45 per cent for the next 12 months and 55 per cent for the next 24 months.
