By Adedapo Adesanya
The oil market gained more than 2 per cent on Wednesday, bouncing back from multi-month lows, after data showed a bigger-than-expected draw in crude stockpiles in the United States, even as worries about weak oil demand in China persisted.
Brent crude futures appreciated by $1.85 or 2.42 per cent during the session to $78.33 a barrel and the US West Texas Intermediate (WTI) crude futures rose by $2.03 or 2.77 per cent to $75.23 per barrel.
The Energy Information Administration reported an inventory decline of 3.7 million barrels to 429.3 million barrels for the week to August 2 versus a draw of 3.4 million barrels for the last week of July.
A day earlier, the American Petroleum Institute (API) reported an estimated build of 180,000 barrels for the week to August 2, surprising markets and pressuring oil prices. The API also estimated large builds in gasoline and middle distillate inventories for the period.
On Monday, Brent slumped to its lowest since early January and WTI touched its lowest since February, as a global stock market rout deepened on concerns about a potential recession in the US after weak jobs data.
The API’s report on Tuesday contributed to the bearish sentiment and fresh Chinese oil import data out earlier today also fueled bearishness.
The country’s customs data showed that China’s July oil imports fell by 12 per cent on the year and 3 per cent on the month, to the lowest level since September 2022.
Fuel demand in China has been weakening due to lower construction activity and the consequent slowdown in diesel demand.
On the bullish side, fears of an escalation in the Middle East continue to run high in anticipation of Iran’s retaliatory strike against Israel after the latter killed the leader of Hamas in Tehran, the capital of Iran.
Following the assassination of prominent members of terrorist organisations Hamas and Hezbollah last week, the Middle East is preparing for a fresh wave of strikes by Iran and its supporters, with fears growing that the Gaza conflict may escalate into a larger Middle East war.
On Wednesday, Iran-aligned Houthi terrorists assaulted a cargo ship in the Red Sea and two US warships in the Gulf of Aden. Attacks on boats sailing through the area have prompted tankers to take lengthier alternative routes.
Lower production at Libya’s 300,000 barrel-per-day Sharara oilfield is also adding to concerns about supply shortages.
Libya’s National Oil Corporation declared force majeure in its Sharara oilfield from Wednesday (August 7), the company said, a day after it said it would gradually decrease production at the field due to protests.
