Oil prices rose in volatile trade today as worries about tight fuel supplies ahead of winter offset investor concerns about lower demand in China, the world’s biggest crude importer, and further increases in US and European interest rates.
Brent crude had risen 50 cents, or 0.5%, to $94.50 a barrel in early trade. WTI crude increased by 52 cents, or 0.6%, to $88.30 a barrel.
Both contracts fell by more than $1 earlier in the session.
Worries over tighter inventories continue to support prices.
In the US, the Strategic Petroleum Reserve (SPR) fell 8.4 million barrels to 434.1 million barrels in the week ended September 9, the lowest since October 1984, according to data released on Monday by the Department of Energy.
US President Joe Biden in March set a plan to release 1 million barrels per day over six months from the SPR to tackle high US fuel prices, which have contributed to inflation.
US commercial oil stocks are expected to have fallen for five weeks in a row, dropping by around 200,000 barrels in the week to September 9, a preliminary Reuters poll showed yesterday.
The American Petroleum Institute (API), an industry group, will issue its inventory report later this evening. The US Energy Information Administration (EIA) reports tomorrow.
“We remain constructive on oil prices despite intensifying headwinds to demand, as the supply side remains supportive with slower-than-expected U.S. output growth and a proactive OPEC+,” Amarpreet Singh, an energy analyst at Barclays, wrote a note.
Prospects for a revival of the West’s nuclear deal with Iran remained dim. Germany expressed regret that Tehran had not responded positively to European proposals to revive the 2015 agreement.
US Secretary of State Antony Blinken said that an agreement would be unlikely in the near term.
Capping gains on oil prices today were renewed concerns about lower global fuel demand, as China, the world’s second-largest oil consumer, continues to impose Covid-19 curbs.
The number of trips taken over China’s three-day Mid-Autumn Festival holiday shrank, with tourism revenue also falling, official data showed, as strict Covid-19 rules discouraged people from travelling.
The US consumer price index data is set for release later this afternoon. While expectations are that the core inflation rate may show a peak, the European Central Bank and the Federal Reserve are prepared to increase interest rates further to tackle inflation.
“The odds for the Fed to keep aggressive rate hikes will be strengthened if US CPI comes out hotter than expected,” said Tina Teng, an analyst at CMC Markets.
That could lift the value of the US dollar against other global currencies and make dollar-denominated oil more expensive for investors.