Oil prices rose, recovering from a series of losses, after a government report revealed that US crude inventories had dropped to their lowest level since February.
West Texas Intermediate (WTI) crude surpassed $77 a barrel, rebounding from a 5.5% decline since last Wednesday. The Energy Information Administration reported that US oil inventories fell by 3.74 million barrels last week, marking the fourth consecutive decline. However, price gains were limited as traders also monitored declines in equity markets.
The earlier selloff in crude was intensified by trend-following algorithms after futures broke key technical levels. On Tuesday, WTI entered oversold territory on the 9-day relative strength index, indicating an imminent rebound.
US gasoline inventories also saw their largest drop since March, as some refineries remain shut and the summer driving season pushed seasonal fuel demand on a four-week basis to its highest level since 2021. Although the driving season typically peaks in late July, there may still be room for prices to rally.
“It’s still summer driving season,” said Rob Thummel, a portfolio manager at Tortoise Capital Advisors. “There’s still vacation. There could still be some good demand numbers over the next several weeks.”
Oil’s recent weakness has been driven by concerns about reduced demand in China, the world’s largest crude importer, with technical traders adding to the downward pressure. Despite this, futures remain higher year-to-date, as OPEC continues with output cuts, and a Bloomberg tally showed Russian exports dropping to their lowest since December.
Russia plans to make additional crude output cuts in October and November, as well as between March and September next year, to compensate for earlier overproduction, the Energy Ministry announced on Wednesday.
Meanwhile, wildfires across Canada’s oil-producing regions are threatening almost 10% of the area’s oil production. In Alberta alone, 170 blazes are burning, with more than 50 out of control.
