By Florence Tan
In early Asian trade on Thursday, oil prices rose, rebounding from recent losses, as industry data revealed an unexpected decrease in stockpiles last week.
Crude futures saw a 0.6% increase, with Brent crude at $74.67 a barrel and U.S. West Texas Intermediate crude at $70.84 a barrel.
Despite settling at their lowest levels since October 2 for two consecutive days, both crude benchmarks are down 6-7% this week due to reduced demand forecasts by OPEC and the International Energy Agency for 2024 and 2025.
Risk premiums have also decreased following eased concerns about potential disruptions in oil supplies from a retaliatory attack by Israel on Iran, although uncertainties remain regarding conflicts in the Middle East.
Market analyst Tony Sycamore from IG in Sydney highlighted the importance of waiting for details on China’s fiscal stimulus package and Israel’s response to Iran, both of which could impact crude oil prices positively.
In the U.S., crude oil and fuel stocks decreased last week, contrary to expectations of a build-up in crude stockpiles.
Gasoline inventories fell by 5.93 million barrels, and distillate stocks dropped by 2.67 million barrels, according to market sources.
The Energy Information Administration will release its data on Thursday, which could provide further insights into the oil market.
Additionally, the European Central Bank is expected to announce another interest rate cut on Thursday, focusing on protecting economic growth in the euro zone.
Analysis:
The rise in oil prices following a drop in stockpiles indicates a potential shift in market dynamics. Reduced demand forecasts and geopolitical uncertainties have previously weighed on oil prices, but positive developments in China’s stimulus package and Israel’s response to Iran could provide upside risks for crude oil. Additionally, the ECB’s rate cut decision could impact global economic conditions and further influence oil prices. Investors should monitor these factors closely to make informed decisions about their investments and financial strategies.