© Reuters. FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford/File Photo
By David Gaffen
NEW YORK (Reuters) -Oil prices rose on Wednesday as caution over tightening supply countered the negative impact of uncertain Chinese demand growth and news that the United States will release more crude from its reserves.
futures for December settlement were up $1.54, or 1.6%, to $91.56 a barrel by 12:47 p.m. EDT (1647 GMT). U.S. West Texas Intermediate crude (WTI) () for November, that is expiring on Thursday, was at $84.55 a barrel, up $1.73, or 2.1%.
In the previous session, the benchmarks hit a two-week low on reports that U.S. President Joe Biden plans to release 15 million barrels of oil from the Strategic Petroleum Reserve (SPR). Biden is set to speak at 1:15 p.m. EDT (1715 GMT) on efforts to lower fuel costs in the United States, which have dropped over the last two weeks but remain higher than a month ago.
inventories fell unexpectedly last week – down 1.7 million barrels, weekly government showed, against expectations for a build of 1.4 million barrels. SPR levels fell 3.6 million barrels to just over 405 million, the lowest since May 1984. [EIA/S]
Meanwhile, U.S. refiners were still operating at higher rates than usual for this time of year, running at 89.5% of capacity.
“Oil is taking it as a positive as we got a surprise drawdown even with another SPR release,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “Refinery runs came in stronger than anticipated. Supplies are still dangerously tight which should give us some support.”
A pending European Union ban on Russian crude and oil products and the output cut from the Organization of the Petroleum Exporting Countries and other producers including Russia, a group known as OPEC+, of 2 million barrels per day also supported prices.
The EU’s sanctions on Russian crude takes effect in December, and sanctions on oil products will take effect in February.
“Prices need to rise above $100 a barrel in the coming months to slow demand growth and restore the supply-demand balance, in our view, given that oil inventories stand at a multi-year low,” said UBS analysts in a note.
China this week postponed the release of some key economic data, a highly unusual move that stoked fears of weak growth.
There were also some signs of resurgent Chinese oil demand, including private mega refiner Zhejiang Petrochemical Corp (ZPC) and state-run ChemChina receiving further import quotas.