By Peter Nurse
Oil prices rose Thursday, supported by the surprise drop in U.S. crude inventories and shrugging off measures from the Biden administration to release more oil from strategic reserves.
By 09:30 ET (13:30 GMT), U.S. crude futures traded 1.8% higher at $86.00 a barrel, while the Brent contract rose 1.3% to $93.63.
Oil bulls have taken heart from the data released Wednesday which showed that U.S. crude oil inventories unexpectedly shrank by 1.7 million barrels last week, indicating that crude consumption in the largest market in the world remained steady despite the hit to disposable income caused by soaring inflation.
“The fall in crude stocks was largely driven by a recovery in exports which grew by 1.27MMbbls/d over the period,” said analysts at ING, in a note.
This sign of resilient U.S. demand has boosted the market and overshadowed attempts by the Biden administration to tame rising energy prices that have fueled inflation.
U.S. President Joe Biden confirmed on Wednesday plans to release 15 million barrels from the U.S. strategic reserve by year's end, and threatened more to come as he seeks to negate high energy prices as an election topic ahead of the midterm elections on Nov. 8.
“Given that this volume is part of the previously announced larger release, the impact on the market is minimal,” ING added. “This latest release will do little to offset the impact of OPEC+ supply cuts - the release is equivalent to less than 14 days of OPEC+ supply cuts, whilst the OPEC+ deal is set to run through until the end of 2023.”
Helping the tone Thursday was a Bloomberg report that Chinese authorities were considering cutting the quarantine period for inbound visitors to seven days from 10 days.
China is the world's largest crude importer, but its demand has suffered this year as it has stuck to strict COVID-19 curbs, which weighed heavily on business and economic activity. Any sign that Beijing is prepared to loosen its tight mobility restrictions to combat the occasional COVID outbreaks will be received positively.
That said, global demand for fuel remains uncertain with aggressive monetary tightening likely to lead to a global slowdown, even as the number of Americans filing new claims for unemployment benefits fell unexpectedly last week.
German producer price inflation hit nearly 50% on the year, mainly due to a 250% increase in gas and electricity prices, highlighting the cost of living crisis that is likely to hit economic activity in Europe this winter.