Oil Prices Increase Amid Expected Decline in US Crude and Fuel Stocks

Oil Prices Rebound Following Inventory Declines and Supply Threats

Oil prices saw a recovery on Wednesday after a three-day slump, due to decreasing U.S. crude inventories and mounting supply risks from Canadian wildfires. Brent crude futures for September rose by 0.5% to $81.38 a barrel, while U.S. West Texas Intermediate (WTI) crude for September increased by 0.5% to $77.34 per barrel. This comes after WTI experienced a 7% drop over the previous three sessions and Brent nearly 5%.

The American Petroleum Institute (API) reported that U.S. crude oil, gasoline, and distillate inventories decreased for the fourth consecutive week, an indication of steady demand in the United States, the world's largest oil consumer. The week ending July 19 saw crude stocks fall by 3.9 million barrels, gasoline by 2.8 million, and distillates by 1.5 million barrels, making it the first four-week consecutive decline in U.S. crude stocks since September 2023. Official government data on oil inventories is expected to be released on Wednesday.

Canadian Wildfires Add to Supply Concerns

Wildfires in Canada have exacerbated supply concerns, with some producers being forced to curtail production. Analysts at ING noted that the market is nearing oversold territory and expressed confidence that fundamentals would push prices higher in the third quarter, backed by a deficit environment. They highlighted the potential threat to a significant amount of supply due to the continuing fires.

Market Influences and Global Context

The recent increase in oil prices follows a six-week low on Tuesday, where Brent crude saw its lowest closing since June 9. This was influenced by discussions of a ceasefire between Israel and Hamas, outlined in a plan by U.S. President Joe Biden and mediated by Egypt and Qatar. Additionally, ongoing concerns over an economic slowdown in China, the world's largest crude importer, have been weighing on global oil demand.