Oil prices rose on Wednesday, buoyed by a drop in US inventories and geopolitical concerns in the Middle East. Gains limits by the rapid spread of the coronavirus Delta type in major consuming countries.
By 0815 GMT, Brent crude oil futures were up 33 cents, or 0.5 per cent, to $72.74 per barrel. West Texas Intermediate (WTI) crude in the United States climbed 16 cents, or 0.2 per cent, to $70.72 per barrel. Oil bulls became bolstered by inventory dynamics in the United States. Particularly, as commercial stockpiles fell to their lowest level since January 2020 and showed signs of expected tightening.
According to two market sources quoting American Petroleum Institute data, oil stocks in the United States decreased by 879,000 barrels in the week ending July 30. According to the article, gasoline stockpiles fell by 5.8 million barrels. This is while distillate stocks fell by 717,000 barrels, according to anonymous sources. Tensions in the Middle East Gulf also aided prices.
Attack on a tanker
On Tuesday, three marine security sources that Iranian-backed commandos seized an oil product tanker off the coast of the United Arab Emirates. However, Iran disputed these accusations.
Since Friday, this is the second attack on a tanker in the region, including the Strait of Hormuz. The United Kingdom and the United States have accused Iran of the last incident. This incident occurred when drones crashed into the vessel and killed two sailors. Both futures contracts plummeted to their lowest levels since July 21 before reclaiming ground by the close, pushed down by the spread of the virus.
Worries about the expansion of the Delta version in China continue to increase. The rise in infections is severely weighing on oil prices in recent days, bank ING stated. Two of the world’s most significant oil users, the United States and China, are dealing with the rapid spread of the highly contagious Delta type. Researchers are concerned that it will diminish gasoline demand when it is generally high in both countries.
The spread of the variation from the shore to inland areas in China forced officials to implement rigorous measures to contain the outbreak.
China’s meddling cools
China’s massive industrial industry, population, and fast-growing economy have essential commodities requirements that far outnumber local output. The recent surge in the price of everything from copper to coal has pushed up the country’s producer prices to their highest level since 2008, hampering its recovery from the coronavirus outbreak.
Recent Chinese government actions succeeded in removing some of the foam off commodity prices, said Frederic Neumann, co-head of Asian Economics at HSBC. However, Chinese policymakers can only indirectly influence raw material prices fundamentally driven by global supply and demand. China imports more than half of all critical metals. It also imports one-third of all transported crops, and around 20% of international oil exports.
The growth rate in China’s factory-gate prices slowed slightly in June as Beijing’s initiatives took effect. The 8.8 per cent year-on-year increase remains uncomfortably high for most businesses. It has limited room to pass on increasing costs in the face of fierce competition.