Oil prices increase after drop in US crude oil inventories
Date
8/14/2024 9:36:03 AM
(MENAFN) Oil prices rose on Wednesday following reports of a significant drop in U.S. crude oil inventories and escalating geopolitical tensions. However, gains were tempered by forecasts from the Organization of petroleum Exporting Countries (OPEC), which predicted stronger production and weaker demand. The international benchmark, brent crude, increased by 0.7 percent, reaching USD81.25 per barrel by 10:44 a.m. local time (0744 GMT), up from the previous session’s close of USD80.69. Similarly, the U.S. benchmark, West Texas Intermediate (WTI), rose by 0.7 percent to USD78.92 per barrel, after closing at USD78.35 in the prior session.
The support for both benchmarks was largely driven by data released late Tuesday by the American Petroleum Institute (API), which revealed a 5.2-million-barrel decrease in U.S. crude oil inventories, surpassing market expectations of a 2 million barrel draw. This significant decline in U.S. commercial crude reserves pointed to strengthening domestic demand, contributing to the upward momentum in prices. Market participants are now awaiting official figures from the Energy Information Administration, expected later today, with any confirmed decrease in inventories likely to further push prices higher.
Geopolitical tensions also played a critical role in the price increase, particularly concerns over potential supply disruptions. The United States Central Command reported on Tuesday that it had destroyed two Houthi vessels in the Red Sea, citing a "clear and imminent threat" to U.S. and coalition forces in the area. This action followed Yemen’s Houthi group targeting Israeli-linked cargo ships in solidarity with Gaza amid ongoing conflict. Given the Red Sea's importance as a major route for oil and fuel shipments, these developments have heightened concerns about supply disruptions, lending additional support to oil prices.
Further compounding supply concerns is the ongoing conflict between Ukraine and Russia. Ukrainian President Volodymyr Zelenskyy reported advances by Ukrainian forces in the Kursk region, which has added to fears of potential disruptions. Despite these factors pushing prices higher, OPEC's latest monthly report has dampened further gains. The report forecasts a 185,000 barrels per day (bpd) increase in crude output for July, raising concerns about oversupply. Additionally, OPEC revised down its global oil demand growth forecast for 2024 by 135,000 bpd, which has contributed to limiting the extent of price increases.
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