Oil prices increased on Wednesday, supported by industry data indicating a significant reduction in U.S. inventories, alongside tensions in the Middle East and supply interruptions in Libya.
Crude prices had dipped in the previous session due to profit-taking following a robust rebound over the past week, while ongoing worries about an economic slowdown also weighed on the market.
Brent crude futures set to expire in October rose by 0.5 percent to $79.92 a barrel, while West Texas Intermediate (WTI) crude futures saw a similar increase of 0.5 percent, reaching $75.92 a barrel as of 20:25 ET (00:25 GMT).
U.S. inventories decline more than anticipated – API
Data from the American Petroleum Institute (API) revealed that U.S. oil inventories dropped by 3.4 million barrels for the week ending August 23, surpassing expectations of a 3 million barrel decline. Additionally, the report indicated ongoing reductions in gasoline and distillate stockpiles.
Typically, API data is indicative of trends expected in the official inventory figures, which are scheduled for release later on Wednesday. U.S. inventories have decreased in eight of the last nine weeks, fueling optimism that demand remains robust in the world’s largest fuel-consuming nation, despite recent indications of an economic slowdown.
However, as September approaches, the end of the busy summer travel season may lead to a reduction in U.S. fuel demand. Concerns about a potential economic slowdown in the U.S. persist, along with expectations that the Federal Reserve may start lowering interest rates in September.
Read more: Oil prices pause after recent surge amid Middle East tensions, Libyan shutdowns
Geopolitical tensions support crude prices
Geopolitical risks have also prompted traders to apply a higher risk premium to oil prices. Libya has come into sharp focus as the eastern administration reportedly halted all oil production amid escalating disputes over the leadership of the Central Bank of Libya.
The central bank serves as the sole internationally recognized custodian for Libya’s oil exports and is at the heart of a growing conflict between the country’s eastern and western factions. Libya produced approximately 1.2 million barrels per day of crude in July, and any disruptions in output could lead to tighter global oil markets.
In the Middle East, tensions between Israel and Hamas remain high, with recent peace talks over the weekend failing to produce any agreement.
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