Oil prices edged higher during the Asian session on Wednesday to continue a recent surge as concerns over Middle Eastern supply disruptions remained, while crude inventory data from the US revealed a mix of solid increases and declines.
March contract Brent crude oil futures were trading 0.22% higher at $77.76 per barrel, while the same contract US West Texas Intermediate (WTI) futures rose 0.28% to $72.49 per barrel.
Both benchmarks whipsawed at the beginning of the week, posting steep losses on Monday as Saudi Arabia cut the Arab Light official selling price (OSP) for February to Asia to a 27-month low of $1.50 per barrel over Oman/Dubai quotes, as the country observed weak demand.
However, crude prices recovered on the prospect of a tight oil market due to supply disruptions in the Middle East, as the fight between Israel and Hamas militants persisted and as Libya’s Sharara oilfield, the country’s largest, suspended production on Sunday following the recent protests.
Oil prices fell more than 10% in 2023 as sluggish demand and slightly loose markets weighed on prices most of the year.
US Crude Stocks Drop, Product Inventories Post Another Build
Data from the American Petroleum Institute (API) showed that US crude stocks dropped 5.22 million barrels in the week to January 5 from the draw of 7.42 barrels the previous week. The reading also exceeded forecasts for a 1.2 million barrel slide.
The decline came as US refiners increased exports to fill a supply loss sparked by Middle Eastern disruptions.
Still, the API reading also presented another week of high gasoline and distillate inventories, signaling continued weakness in the demand of the world’s top oil consumer.
The outlook was further reinforced by a large winter storm in the eastern part of the country, which hindered road travel and left thousands of homes and businesses in 12 states without electricity.
Unforgiving weather brought about by the winter season has led US fuel demand to stumble significantly in recent months, dragging the country’s gasoline prices to their lowest levels in two years.
The softer demand for US fuel has also further raised the possibility that global oil demand will lose momentum this year.
Data from the API often points to a similar result from official inventory data, which will be published later on Wednesday.
