Crude oil prices extended their gains from Tuesday after the American Petroleum Institute reported an estimated inventory draw of over 5 million barrels that observers had not expected.
That followed a weekly inventory draw of over 7 million barrels for the previous week, suggesting strong demand for crude.
Following the release of the API report, Brent crude ticked up closer to $78 per barrel and West Texas Intermediate moved up above $72 per barrel.
The Energy Information Administration is reporting its own inventory estimate later today.
“The confluence of factors surrounding the Middle East developments, a conflicting supply outlook, and slow global growth have been driving this wider indecision in prices,” IG Asia market strategist Yeap Jun Rong told Bloomberg.
"Oil prices are still hovering in a low range, but investors holding long positions are dominating the market mood at this very moment," Haitong Futures analysts said, as quoted by Reuters.
Earlier this week, Rabobank global energy strategist Joe DeLaura told the FT that traders were unwilling to risk shorting oil in the mid-$70s because “you could wake up one morning and there could be a tanker sunk in the Red Sea”.
The Yemeni Houthis have so far steered clear of tankers and oil and fuels are moving freely in the Red Sea, Container ships, however, remain targets, unless they send a signal that they have no affiliation with Israel per a statement from the Houthis’ leader, Mohammed Al-Houthi posted on X.
In addition to the inventory draw and the continued tension in the Middle East, the Energy Information Administration contributed to a more bullish sentiment towards oil when it said on Tuesday that demand for oil could exceed supply by 120,000 bpd this year.
The forecast comes amid expectations of weaker production growth in the shale patch after a stronger-than-expected 2023.
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By Irina Slav for Oilprice.com
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Oil prices have been lower than what the fundamentals and demand could support. The reason is deliberate manipulation of the market by oil traders, speculators and the United States to depress oil prices under the pretext of weakening demand for the benefit of the stagnating US economy.
These ploys could work for a short period but then no one can fool the markets for ever. That is when the storm comes roaring after the calm.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert