July 24 2024: Oil prices rose on Wednesday, recovering from recent losses after industry data showed a decline in U.S. inventories, suggesting strong demand from the world’s largest consumer.
At 08:30 ET (12:30 GMT), Brent oil futures rose 1.2% to $77.89 a barrel, while West Texas Intermediate crude futures climbed 1% to $81.80 a barrel.
US Inventories Unexpectedly Decline
Data from the American Petroleum Institute (API) showed U.S. oil inventories shrank by 3.9 million barrels last week, compared with expectations for a build of 0.7 million barrels. The API data, which usually signals a similar trend from official inventory data, indicated inventories shrinking for a fourth consecutive week, likely due to increased oil demand during the travel-heavy summer season. The API data also showed draws in gasoline and distillate inventories, indicating robust demand in the world’s largest fuel consumer. Official oil inventory data from the Energy Information Administration is due later on Wednesday.
Canadian Wildfires Threaten Supply
Wildfires in Canada have forced some producers to curtail production, threatening a significant amount of supply. Bloomberg reported that 388,000 barrels per day of oil production is within 10 kilometers of fires that are at least 10 hectares in size.
Oil Outlook Remains Cautious Amid Supply Glut Concerns
Despite the recent gains, oil prices had struggled with steep losses in recent sessions due to a forecasted surplus in 2025. Concerns over top importer China and speculation over an Israel-Hamas ceasefire also weighed on crude markets. Morgan Stanley forecasts an oil surplus by early 2025 and expects crude prices to trend in the high $70s next year. Increased global oil production and the prospect of softer demand in China are expected to keep oil markets well-supplied in the coming months.
China has been a major concern for crude markets, amid uncertainty over its economic recovery. Recent data showed the country’s economy grew less than expected in the second quarter, while its oil imports fell sharply in June. The Third Plenum of the Chinese Communist Party provided few cues on Beijing’s plans for more stimulus. Sentiment towards China is also on edge amid uncertainty over how a potential change in U.S. administration will affect Washington’s stance towards the country.
(Ambar Warrick contributed to this article.)
