Oil prices edged up on Wednesday as a bigger-than-expected U.S. crude storage withdrawal, Chinese economic stimulus and geopolitical tensions countered concerns over tepid demand.
Brent futures were up 15 cents, or 0.2%, to $79.70 a barrel at 10:38 a.m. EST (1538 GMT), while U.S. West Texas Intermediate (WTI) crude was up 31 cents, or 0.45%, to $74.68.
In a move expected to shore up a fragile economic recovery, China’s central bank will cut the amount of cash that banks must hold as reserves from Feb. 5.
In the U.S., the Energy Information Administration (EIA) said energy firms pulled a much bigger-than-expected 9.2 million barrels of crude from stockpiles during the week ended Jan. 19. EIA/A ,
That easily topped the 2.2-million barrel draw analysts forecast in a Reuters poll, and compares with the 6.7-million barrel decline seen in data from the American Petroleum Institute (API) industry group, a build of 0.5 million barrels in the same week last year and a five-year (2019-2023) average increase of 0.1 million barrels for the period.
Geopolitical tensions, which have led to a massive displacement in global trade, remained in focus.
“Trade disruptions in the Red Sea add only a marginal premium to oil prices and no physical supplies have been lost so far, but regional escalation cannot be ruled out,” HSBC Global Research said in a note.
A coalition of 24 nations led by the U.S. and UK conducted new strikes against Houthi fighters in Yemen on Tuesday. The strikes were aimed at stopping the Houthis’ attacks on global trade, Britain said in a joint statement.
The U.S. said Iran-aligned Houthis have mounted 26 attacks since late November on commercial shipping in the Red Sea, a shipping lane used by about 12% of global oil trade before the attacks.
The U.S. also carried out strikes against Iran-linked militia in Iraq on Tuesday, following an attack on an Iraqi air base that wounded U.S. forces.
Elsewhere in the Middle East, Israel and Hamas have made some progress toward agreement on a 30-day ceasefire in Gaza when Israeli hostages and Palestinian prisoners would be released, sources told Reuters, as Israel pressed ahead with its assault on southern Gaza’s main city.
DEMAND WORRIES
In Europe, euro zone businesses faced a tough start to 2024 with activity contracting again in January as demand continued to fall while price pressures rose due to tensions in the Red Sea.
Germany’s Ifo institute again downgraded its 2024 economic growth forecast, citing uncertainty caused by changes to the federal budget necessitated by a court ruling.
In France, protesting farmers blocked several roads to press the government to loosen regulations and help protect them from cheap imports and rising costs.
On the supply side, Russian energy company Novatek (NVTK.MM), opens new tab resumed fuel loadings on Wednesday at its Baltic Sea Ust-Luga terminal, damaged in a suspected drone attack.
Source: Reuters (Reporting by Scott DiSavino, Ahmad Ghaddar, Noah Browning, Colleen Howe and Muyu Xu; Editing by Sharon Singleton and Mark Potter)