Crude oil began trade today with a gain on the back of expectations that China may begin to ease its Covid restrictions and on data from the American Petroleum Institute pointing to another decline in U.S. crude oil inventories.
China's Covid lockdowns have been one of the big headwinds for oil prices, keeping a lid on any rally since the summer as one of the world's biggest consumers continues with its zero-Covid policy.
Yet stock price movement data this week reflects growing hopes that Beijing will soon begin to relax restrictions, which would have a strong positive effect on oil demand and, therefore, prices.
Meanwhile, the API estimated that crude oil inventories in the United States had shed 6.53 million barrels last week, with gasoline stocks also declining, by 2.64 million barrels, while distillate stocks added a modest 865,000 barrels, according to the industry group.
Government data on crude oil and fuel inventories is due out later today.
On Tuesday, crude oil benchmarks Brent and WTI both gained about 2 percent thanks to the news from China but also to a weaker U.S. dollar, after their first monthly gain since May, as October proved cumulatively positive.
Analysts quoted by Reuters in a recent report have pointed to even higher prices, too, citing the OPEC+ production cuts, record U.S. exports, and the possibility that the Biden administration will stop releasing crude from the strategic petroleum reserve.
Meanwhile, OPEC reported steady production rates through October despite an agreement to cut output by a modest 100,000 bpd, which was more symbolic than actual with so many members of the cartel already falling short of their quotas.
Russia's October output, however, was significantly lower than a year ago, at 9.9 million bpd. This compares to an OPEC+ quota of 11 million bpd.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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The world is facing a unique type of recession. One that causes the global economy to shrink but without affecting oil prices and without a demand destruction. This is so because of a tight market, robust oil demand and a shrinking spare production capacity leaving no spare oil for recession to destroy.
That is why oil prices are starting their surge with Brent crude projected to go above $100 a barrel before the end of the year.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert