- US crude stocks fell by 7.1 mln barrels in the past week.
- Russia to boost oil output in the wake of strong Asian demand.
- The market anticipates Iran’s response regarding its Nuclear proposal
After reaching a six-month low, crude oil prices increased on Wednesday by approximately 1.5% as concerns over rising Russian output and exports and recession fears were overshadowed by a steeper-than-expected decrease in US crude storage.
According to Energy Information Administration (EIA) data, US oil inventories decreased by 7.1 million barrels in the week ending August 12 to 425 million barrels, compared to experts’ predictions for a 275,000-barrel decline in a Reuters poll.
According to EIA data, US crude exports reached 5 million barrels per day, the highest level ever, as WTI has been trading at a significant discount to Brent, making purchases of US petroleum more appealing to international purchasers.
“It was expected to be a friendly report, and it was pretty much across the board. Some of those demand destruction concerns that the market was going through seem to be alleviated a little bit,” said Phil Flynn, an analyst at Price Futures Group.
Oil prices have risen dramatically in 2022, almost reaching an all-time high of $147 in March following Russia’s invasion of Ukraine.
However, following a rise in purchases from Asian consumers, Russia has begun to progressively expand oil production, prompting Moscow to enhance its output and export projections through the end of 2025. It shows that the country’s supply has not been as significantly impacted as initially anticipated by markets.
Oil prices have also recently been affected by the possibility of a recession. The rate of consumer price inflation in Britain increased to 10.1% in July, its highest level since February 1982, tightening the financial situation for consumers and driving down the price of oil earlier in the day.
On the supply side, the market is anticipating news from negotiations to resurrect the 2015 nuclear agreement between Iran and world powers, which may eventually increase Iranian oil shipments.
Despite the slight increase in oil prices on Wednesday, the downtrend will likely continue as global recession worries are here to stay until inflation starts going down. With supply returning to normal, poor demand brought on by recession worries will continue weighing on prices.