Oil prices rose sharply on Wednesday, climbing back from recent multi-week lows. The gains came as industry data showed a fifth straight week of sizable drawdowns in U.S. crude inventories, a sign of a tightening market in the world’s largest fuel consumer.
Brent crude futures for September delivery jumped 1 percent to $79.45 per barrel, while West Texas Intermediate (WTI) crude futures climbed 1.2 percent to $75.64 per barrel as of 3:05 GMT.
Significant inventory drawdowns
The American Petroleum Institute (API) reported on Tuesday that US crude inventories fell by nearly 4.5 million barrels in the week to July 26. This marked the fifth consecutive week of inventory declines, as robust summer travel demand continued to support fuel consumption.
Some of the larger-than-expected inventory draws were also attributed to supply disruptions from a recent hurricane in the Gulf of Mexico. The official government inventory data is due to be released later on Wednesday and is expected to show a similar trend.
Fragile recovery amid demand concerns
Despite Wednesday’s price gains, the oil market’s recovery remains fragile, with lingering concerns over slowing demand in China, the world’s top oil importer. Weak purchasing managers’ index (PMI) readings from China added to these demand worries.
Traders are also exercising caution ahead of a key Federal Reserve interest rate decision and a meeting of the Organization of the Petroleum Exporting Countries (OPEC). The OPEC Joint Ministerial Monitoring Committee is scheduled to meet on Thursday, but analysts expect no major changes to production quotas, despite the recent softness in oil prices.
Read more: Oil prices slide to two-month low ahead of OPEC meeting, Fed policy decisions
Production cut agreement to provide support
However, major producers like Russia and Saudi Arabia are likely to reiterate their commitment to the current production cut agreement, which could provide some support for oil prices going forward.
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