MELBOURNE- Oil prices rose in early trade on Wednesday after industry data showed a surprise drop in US crude stockpiles, suggesting demand is holding up despite steep interest rate hikes dampening global growth.
Brent crude futures picked up 17 cents, or 0.1 percent, to $94.82 a barrel, while US West Texas Intermediate (WTI) crude CLc1 futures rose 26 cents, or 0.3 percent, to $88.63 a barrel.
Both benchmark contracts rose about 2 percent in the previous session on a weaker US dollar and after an unverified note trending on social media said the Chinese government was going to consider ways to relax COVID rules from March 2023.
In a further positive sign for demand, data on Tuesday from the American Petroleum Institute showed crude stocks fell by about 6.5 million barrels for the week ended Oct. 28, according to market sources.
Eight analysts polled by Reuters had on average expected crude inventories to rise by 400,000 barrels.
At the same time, gasoline inventories fell more than expected, with stockpiles down by 2.6 million barrels compared with analysts’ forecasts for a drawdown of 1.4 million barrels.
China’s zero-COVID policy has been a key factor in keeping a lid on oil prices as repeated lockdowns have slowed growth and pared oil demand in the world’s second largest economy.
“Potential changes to China’s COVID-19 policy could have significant implications for oil demand,” ANZ Research analysts said in a note.
Meanwhile, US exports of liquefied natural gas (LNG) in October remained capped by plant outages, with producers shifting more cargoes to Asian buyers last month, according to RefinitivEikon tanker monitoring data, after of a pipeline leak cut supplies from Malaysia.
LNG prices recently have cooled with Europe’s gas storage levels rising to over 90 percent of target capacity and a slow start to winter.
In Asia, however, a declaration of force majeure on gas supplies by Malaysian state-energy company Petronas has LNG customers in Japan scrambling for alternative cargoes. Malaysia was the second biggest supplier of LNG to Japan in 2021.
A total of 88 tankers carrying 6.27 million tons of LNG departed in October from US ports, mostly heading to Europe, the data showed. The share of sales to Asian customers rose to 24 percent from 19 percent the previous month, while shipments to Latin America and the Caribbean dropped to a couple cargoes. – Reuters
