Oil prices rise as US stockpiles shrink

Oil prices surged on Wednesday, with WTI price rising to the $79.9 per barrel level. If WTI price declines, it may encounter support near $76.0 per barrel, while resistance may be found near $80.9 per barrel.

US crude oil inventories released on Wednesday showed that US crude stockpiles shrank unexpectedly, boosting oil prices. The US Energy Information Administration reported a weekly drop-in US stockpiles by 1.5M barrels for the week to March 8th, against expectations of a 0.9M barrel raise and following a build by 1.4M barrels the week before.

OPEC+ announced its oil demand and economic growth forecasts in its Monthly Oil Market Report on Tuesday, providing support for oil prices. The organization revised its global economic forecast slightly up in March while keeping its oil demand growth forecasts unchanged from February’s report. According to the report, global oil demand will rise by 2.2 million barrels per day in 2024 and by another 1.8 million barrels per day in 2025.

OPEC+ announced last week its decision to keep its oil output policy unchanged, maintaining the voluntary production cuts that have already been in place through the second quarter of 2024. Russia announced additional cuts of 471K barrels per day as a result of lower refinery runs due to Ukrainian drone strikes. 

Persistent tensions in the Middle East boost oil prices. Supply concerns provide support for oil prices, as the crisis in the Gaza area threatens to disrupt oil distribution. Tensions around the Red Sea area raise concerns that hostilities may spread in the Middle East, affecting oil supply and distribution. 

China’s poor economic outlook is increasing concerns about reduced oil demand, putting a lid on oil prices, however, despite increasing geopolitical risks. Weak economic growth in China raises concerns about future demand, pushing oil prices down. 

Oil prices are also kept in check by a strong US dollar and high-interest rates. The Fed kept interest rates unchanged at its latest policy meeting in January, within a target range of 5.25% to 5.50. 

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Written by:
Myrsini Giannouli

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