By Adedapo Adesanya
The oil market gained about 1 per cent on Wednesday after a decline in US crude stocks but gains were capped by concerns about rising global inventories ahead of the US Independence Day holiday.
Brent crude futures rose $1.10 or 1.3 per cent to settle at $87.34 a barrel and the US West Texas Intermediate (WTI) crude futures increased by $1.07 or 1.3 per cent to $83.88 per barrel.
The US Energy Information Administration (EIA) reported a 12.2 million draw in the country’s crude oil barrels in storage last week versus the inventory build of 3.6 million barrels estimated for the previous week, when the EIA also saw fuel inventories rising, which weighed on oil prices. The EIA estimated draws in fuel inventories for the last week of June.
Gasoline (petrol) inventories shed 2.2 million barrels in the week to June 28, which compared with a build of 2.7 million barrels for the previous week.
The American Petroleum Institute (API) a day earlier estimated a weekly inventory draw, pegging it at a significant 9 million barrels.
Analysts noted that potential supply disruptions to Hurricane Beryl have also kept prices elevated, but the market’s reaction was muted partly due to lower trading volumes ahead of the 248th Independence Day (July 4) of the world’s largest oil producer.
Some concerns eased after the US National Hurricane Center said the storm was expected to weaken by the time it entered the Gulf of Mexico this week, however, the rain and wind impacts could still disrupt Mexico’s offshore oil production as well as its export infrastructure and tighten supply.
Prices have also received support from geopolitical factors this week, as traders worry about a further escalation of violence in the Middle East as Israel continues to bomb Gaza.
Production in the Organisation of the Petroleum Exporting Countries (OPEC) increased for the second straight month in June, according to a poll conducted by Reuters on Tuesday, which hurt oil prices.
The effect of voluntary supply restrictions made by other members and the larger OPEC+ alliance was mitigated by the increased supply from Nigeria and Iran during this period.
On the other hand, surveys revealed that China’s services activity increased at the slowest rate in eight months and business confidence reached a four-year low in June. China is the biggest importer of crude barrels, so a slowdown in the economic activity of the nation might harm the oil demand.
The expansion of businesses throughout the eurozone as a whole also slowed down significantly a month ago.