Oil prices surged more than $1 on Wednesday, partially recovering from the previous day's losses, as a decline in U.S. crude inventories and concerns over potential disruptions to U.S. production due to Hurricane Francine offset worries about weak global demand.
Brent crude futures rose $1.07, or 1.55%, to $70.26 per barrel at 1319 GMT, while U.S. crude futures gained $1.20, or 1.83%, to $66.95. According to market sources citing the latest American Petroleum Institute (API) figures on Tuesday, U.S. crude stocks decreased by 2.793 million barrels, gasoline stocks fell by 513,000 barrels, and distillate inventories increased by 191,000 barrels.
Tamas Varga of oil broker PVM noted, "The API provided some relief as it indicated a significant drop in crude oil stocks, a forecast-beating draw in gasoline, and a minor build in distillate inventories." Both oil benchmarks experienced significant declines on Tuesday, with Brent falling below $70 to its lowest level since December 2021 and U.S. crude hitting its lowest point since May 2023, following OPEC's second downward revision of its 2024 oil demand growth forecast.
Concerns about Hurricane Francine potentially disrupting output in the U.S., the world's largest producer, also supported prices, according to other analysts. Yuki Takashima, an economist at Nomura Securities, stated, "The market rebounded on its own, as Tuesday's drop was substantial," adding that fears of supply disruptions from Francine also provided support. The U.S. Bureau of Safety and Environmental Enforcement (BSEE) reported on Tuesday that 24% of crude production and 26% of natural gas output in the U.S. Gulf of Mexico were offline due to the storm.
Following the API's report on Tuesday, official inventory figures from the U.S. government are expected at 1430 GMT. Eleven analysts polled by Reuters estimated, on average, that crude inventories increased by about 1 million barrels and gasoline stocks fell by 0.1 million barrels.
