Key points:

  • Oil rose for the second day in a row amid a stronger-than-expected decline in US crude inventories.
  • US crude oil inventories fell 5.2 million barrels in a week, more than expected.
  • Concerns over oil supplies from Libya and the Middle East region are also supporting prices.

Oil prices continued their upward trajectory on Wednesday, January 10, as an industry report revealed a larger-than-anticipated drop in crude oil stockpiles in the United States, the world’s top oil consumer. This positive news fueled optimism regarding demand for crude oil.

Brent crude futures gained 26 cents, or 0.3%, to trade at $77.85 per barrel, while U.S. West Texas Intermediate crude futures climbed 27 cents, or 0.4%, to reach $72.51 per barrel.

The power of geopolitical factors

Oil prices increased by around 2% during the previous trading session due to concerns about supply disruptions in Libya and ongoing regional tensions stemming from the conflict between Israel and the Gaza Strip. However, oil prices suffered a decline of over 3% at the opening of the trading week on Monday.

Renewed attacks by Yemen’s Houthi rebels on ships in the Red Sea in support of the Palestinians on Tuesday, and the potential for disruption to oil tanker traffic in the area, also contributed to upward pressure on oil prices.

“Oil prices are still hovering in the low range, but long investors are dominating market sentiment at the moment,”

– said analysts at Haitong Futures, referring to investors buying futures in anticipation of rising prices.

“Last week’s inventory draw may be more of a seasonal change in inventories, but it helps ease downward pressure on oil prices.”

The situation on the oil market in the USA

U.S. crude oil stockpiles declined by 5.2 million barrels during the past week, according to industry data, offering a glimmer of hope for oil markets.

However, this encouraging news was partially offset by increases in gasoline and distillate inventories, which rose by 4.9 million barrels and 6.9 million barrels, respectively, exceeding market expectations of 2.5 million barrels and 2.4 million barrels, respectively.

The Energy Information Administration (EIA), the statistical wing of the U.S. Department of Energy, will release its official inventory data on Wednesday at 10:30 AM ET, providing a more comprehensive picture of the current supply situation.

On Tuesday, the EIA projected global liquid fuel consumption to increase by 1.4 million barrels per day in 2024, a slight slowdown from the 1.9 million barrels per day growth seen in 2023. This moderation is attributed to the weakening Chinese economy and the waning post-pandemic recovery growth momentum.