Oil price rises after US crude inventories fall, weak Chinese economy limits gains
By Georgina McCartney
HOUSTON (Reuters) – Oil prices rose slightly on Wednesday after a bigger-than-expected draw in crude inventories, offsetting some concerns about China’s weakened economy potentially hurting demand in the world’s largest crude importer.
Brent crude futures rose 13 cents, or 0.17%, to settle at $77.33 a barrel at 11:39 a.m. EDT, while U.S. West Texas Intermediate crude futures were unchanged at $73.17.
Since peaking at over $82 on Monday last week, Brent had lost 6.2 percent of its value by the close of trading on Tuesday, closing at a two-week low of $77.20. WTI lost 7.5 percent in the same period.
U.S. inventories of crude oil, gasoline and distillates fell in the week ending August 16, the Energy Information Administration (EIA) said on Wednesday.
Crude oil inventories fell by 4.6 million barrels to 426 million barrels in the week ended August 16, the EIA said. Analysts in a Reuters poll had expected a decline of 2.7 million barrels.
Meanwhile, investors remained concerned that a possible economic weakness in China could weigh on demand for crude oil in the country.
China’s economic problems have contributed to weak processing margins and low fuel demand, which in turn limits the operations of state-owned and independent refineries.
“We measure everything by the Chinese economy right now, and if anything out of China is negative, it will put pressure on the energy market,” said Tim Snyder, chief economist at Matador Economics.
FEWER JOBS
The price of oil was also weighed down on Wednesday by the fact that US employment companies had created far fewer new jobs in the period up to and including March than originally reported, the US Department of Labor said on Wednesday.
The ministry’s estimate for the total number of wage and salary earners for the period April 2023 to March 2024 was reduced by 818,000.
“The sting in the scorpion’s tail that hurts more than anything else is the fact that this data has contributed to a crisis of confidence,” said Snyder of Matador Economics.
Elsewhere, a Greek-flagged oil tanker was adrift in the Red Sea on Wednesday after repeated attacks set the ship on fire and cut off power, Britain’s maritime safety and security agency said.
In solidarity with the Palestinians in the war between Israel and Hamas, the Iran-aligned Houthi fighters have carried out a series of attacks on international shipping near Yemen since last November.
The Red Sea, which leads to the Suez Canal, is a key shipping route for oil, and ongoing Houthi attacks pose a potential threat to global crude oil supplies.
Meanwhile, US Secretary of State Antony Blinken concluded a Middle East trip during which he sought to broker a ceasefire agreement in the Gaza Strip.
Blinken and mediators from Egypt and Qatar have raised hopes of a US “bridge proposal” that could narrow the gap between the two sides in the 10-month-long war.
“Hopes for a ceasefire between Israel and Hamas and ongoing concerns about demand have weighed on oil prices,” said commodity strategists at ING.
(Reporting by Georgina McCartney in Houston; additional reporting by Paul Carsten and Ahmad Ghaddar in London and Jeslyn Lerh in Singapore; editing by David Goodman and David Holmes)
