Oil prices edged higher on Wednesday, rebounding from early losses after U.S. crude stockpiles unexpectedly fell and inventories at the nation’s largest storage site hit their lowest level in three years.
Brent crude futures rose 10 cents, or 0.1%, to $85.18 a barrel as of 11:58 a.m. EDT (1558 GMT), close to multi-year highs.
November U.S. West Texas Intermediate (WTI) crude, which expires on Wednesday, rose 34 cents, or 0.4% to $83.30 a barrel, while the more active WTI contract for December was up 22 cents, or 0.3%, to $82.66 a barrel.
Crude prices have risen as supply has tightened, with the Organization of the Petroleum Exporting Countries maintaining a slow increase in supply rather than intervening to add more barrels to the market, and as U.S. demand has ramped up.
U.S. crude stocks fell by 431,000 barrels in the most recent week, the U.S. Energy Information Administration said, against expectations for an increase, and gasoline stocks plunged by more than 5 million barrels as refiners cut processing due to maintenance. [EIA/S]
U.S. stocks at the Cushing, Oklahoma delivery hub hit their lowest level since October 2018. Gasoline stocks are now at their lowest since November 2019, the EIA said.
“Stronger demand and concerns about a drop in inventories when refiners were already running a low rate during maintenance season is making people concerned about what will happen when refiners have to ramp up production to meet what is very strong demand for gasoline and distillate,” said Phil Flynn, senior energy analyst at Price Futures Group in Chicago.
The market had softened overnight after the Chinese government stepped up efforts to tame record high coal prices and ensure coal mines operate at full capacity as Beijing moved to ease a power shortage.
Oil prices have in part been swept up in surging natural gas and coal prices worldwide in anticipation that power generators may switch to oil to provide electricity.
Saudi Arabia’s minister of energy said users switching from gas to oil could account for demand of 500,000-600,000 barrels per day, depending on winter weather and prices of other sources of energy.