Oil prices edged higher on Wednesday after industry data showed a larger-than-expected drawdown of US inventories signaling robust demand from the world’s biggest oil consumer, but the gains were limited by worries over interest rate hikes.
Brent crude futures rose 51 cents, or 0.71 percent, to $72.77 a barrel, while US West Texas Intermediate (WTI) futures gained 50 cents, or 0.74 percent, to $68.20 a barrel.
Both contracts had fallen by about 2.5 percent in the previous session on signals that central banks may not be done with interest rate hikes.
“Tuesday’s slump took Brent and WTI close to support levels that have held through the price dives of the past couple of months,” said Vandana Hari, founder of oil market analysis provider Vanda Insights. “The floor is being tested again – whether it holds, remains to be seen.”
Brent’s six-month spread – a price structure in which sooner-loading contracts trade above later-loading ones – was at its lowest in six months.
But the two-month spread was in the opposite price position, called contango.
“A widening contango at the prompt end and a weakening backwardation along the Brent and WTI forward curves signals growing market perception of oversupply,” Hari said.
Crude stocks fell by about 2.4 million barrels in the week ended June 23, according to the market sources, citing data from industry group American Petroleum Institute. Analysts had expected a draw of 1.76 million barrels. US government data on stockpiles is due on Wednesday.
Gasoline inventories fell by about 2.9 million barrels, compared with estimates for a draw of 126,000.
On the demand side, European Central Bank President Christine Lagarde said on Tuesday that stubbornly high inflation will require the bank to avoid declaring an end to rate hikes.
Higher interest rates can weigh on economic activity and oil demand. – Reuters
