Oil closes higher and recovers part of losses after US inflation

Oil futures contracts closed higher on Wednesday (14), having recovered part of the losses recorded yesterday, in the wake of higher-than-expected consumer inflation in the United States. With the weakening of the dollar against rivals, the higher-than-expected rise in US oil inventories and the cut in demand forecast by the International Energy Agency (IEA) took a back seat.

On the New York Mercantile Exchange (Nymex), the barrel of WTI oil for October delivery rose 1.31% (US$ 1.17) to US$ 88.48, and Brent oil for November advanced 1.0% ( $0.93) to $94.10 on the Intercontinental Exchange (ICE).

“The oil market looks like it will still remain tight despite some of the weakening demand numbers that the IEA crude oil inventory report is telling us,” said Oanda analyst Edward Moya.

In a report published today, the agency noted that the drop in demand for oil in China, amid the Covid-19 outbreaks, has overlapped with robust consumption in other countries.

The IEA lowered its forecast for Chinese oil demand in 2022 by 400,000 barrels per day (bpd) to 15 million bpd, 420,000 bpd lower than a year ago. For 2023, the agency forecasts 300,000 bpd, to 16 million bpd.

Assets slowed higher after the Department of Energy (DoE) reported that oil inventories rose by 2 million barrels in the week, compared with expectations of a rise of 1 million barrels. Gasoline fell by 1.7 million, against a forecast of a 600,000 decline, and distillates jumped 4 million, compared to a forecast of an increase of 100,000 barrels.

“With US crude oil inventories at their lowest levels since 1984, the Biden administration appears to have trumpeted the possibility of starting to replenish those reserves if the US oil price drops below $80 a barrel,” says the report. Chief Market Analyst at CMC Markets, Michael Hewson.