Oil Prices Rebound After Sharp Drop Amid U.S. Inventory Decline and Hurricane Concerns

Oil prices rose by more than 1% on Wednesday, recovering from previous losses driven by concerns about weakening global demand. A significant decline in U.S. crude inventories and potential supply disruptions due to Hurricane Francine helped bolster the market.

Data from the American Petroleum Institute (API) on Tuesday showed that U.S. crude stocks fell by 2.793 million barrels, while gasoline inventories dropped by 513,000 barrels. Distillates, however, saw a minor increase of 191,000 barrels.

By 0807 GMT, Brent crude was trading at $70.29 per barrel, up by $1.10 or 1.6%, and U.S. crude futures increased by $1.11, or 1.7%, to $66.86.

Analysts noted that the API data eased some concerns, especially given the larger-than-expected draw in crude and gasoline stocks. Tamas Varga from PVM pointed out that the report provided „some comfort“ to the market.

On Tuesday, oil prices saw a steep decline, with Brent dropping below $70 per barrel for the first time since December 2021. This decline was driven by OPEC lowering its 2024 oil demand growth forecast, amplifying fears about weakening global demand.

Further support for oil prices came from worries about Hurricane Francine, which has impacted production in the Gulf of Mexico. The U.S. Bureau of Safety and Environmental Enforcement (BSEE) reported that 24% of crude production and 26% of natural gas output in the region were shut down due to the storm.

While Tuesday’s sharp price drop was substantial, Yuki Takashima of Nomura Securities noted that the market rebounded as concerns over supply disruptions helped lift prices.

Official U.S. inventory data from the Energy Information Administration is expected later on Wednesday, with analysts forecasting a slight increase in crude stocks and a minor decline in gasoline inventories.

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