Oil prices gained on Wednesday following the reduction in U.S. crude and fuel inventories.
However, the market remains cautious due to ongoing concerns about weak global demand.
Brent crude oil, against which Nigerian crude oil is priced, increased by 66 cents, or 0.81% to $81.67 a barrel. Similarly, U.S. West Texas Intermediate crude climbed 78 cents, or 1.01%, to $77.74 per barrel.
The U.S. Energy Information Administration (EIA) reported a substantial decline in crude inventories by 3.7 million barrels last week, surpassing analysts’ expectations of a 1.6-million-barrel draw.
Gasoline stocks also fell by 5.6 million barrels, while distillate stockpiles decreased by 2.8 million barrels, contradicting predictions of a 250,000-barrel increase.
Phil Flynn, an analyst at Price Futures Group, described the EIA report as “very bullish,” indicating a potential for future crude draws as demand appears to outpace supply.
Despite these positive inventory trends, the market is still wary of global demand weaknesses. Concerns stem from a lackluster summer driving season in the U.S., which is expected to result in lower second-quarter earnings for refiners.
Also, economic challenges in China, the world’s largest crude importer, and declining oil deliveries to India, the third-largest importer, contribute to the apprehension about global demand.
Wildfires in Canada have further complicated the supply landscape, forcing some producers to cut back on production.
Imperial Oil, for instance, has reduced non-essential staff at its Kearl oil sands site as a precautionary measure.
While prices snapped a three-session losing streak due to the inventory draws and supply risks, the market remains under pressure.
Factors such as ceasefire talks between Israel and Hamas, and China’s economic slowdown, continue to weigh heavily on traders’ minds.
In recent sessions, WTI had fallen 7%, with Brent down nearly 5%, reflecting the volatility and uncertainty gripping the market.
As the industry navigates these complex dynamics, analysts and investors alike are closely monitoring developments that could further impact oil prices.
