Oil prices witnessed a modest increase on Wednesday following an unexpected drop in U.S. oil reserves, implying strong demand that counterbalanced concerns about potential hikes in interest rates. As per industry insiders citing information from the American Petroleum Institute (API), crude oil reserves diminished approximately 2.4 million barrels. The Energy Information Administration's official supply data is set to release at 1430 GMT.
At 0806 GMT, Brent crude rose by 9 cents, equating to a 0.1% increase, hitting $72.35 a barrel. U.S. West Texas Intermediate (WTI) crude also witnessed an uptick, gaining 26 cents or 0.4%, standing at $67.96. "The API statistics released last night bring some respite this morning," Tamas Varga from oil broker PVM expressed.
Despite an overall surge in prices on Wednesday, the difference between the prompt Brent contract and the subsequent month widened, indicating an excess supply - a scenario termed as contango.
Brent has seen a decline of around 15% this year due to rising interest rates dampening investor interest. Moreover, China's economic rebound has hit a snag with several consecutive months of consumption and other data falling short of expectations.
European Central Bank President Christine Lagarde asserted on Tuesday that persistently high inflation necessitates the bank to refrain from eliminating interest rate hikes. In addition, a surge in U.S. consumer confidence in June sparked worries that the Federal Reserve might need to maintain its trajectory of interest rate hikes.
Nevertheless, a few analysts project a tightening in the market during the latter half of 2023. This can be attributed to ongoing OPEC+ supply reductions and Saudi Arabia's voluntary cut for July. Earlier this week, Saudi Aramco, the world's largest oil firm, projected that market fundamentals would remain "sound" during the second half of the year.