Large US inventory reduction and hurricane worries cause oil prices to increase

30 Aug 2023 , 10:21 AM

Oil prices continued to rise on Wednesday as worries about a hurricane in the Gulf of Mexico kept investors on edge and industry data revealed a significant decline in oil inventories in the United States, the world’s largest fuel user.

The price of October Brent crude futures increased by 17 cents, or 0.2%, to $85.66 per barrel. The more active November contract, which expires on Thursday, was trading at $85.08 per barrel, up 17 cents from the expiring October contract.

In its fifth session of advances, U.S. West Texas Intermediate oil futures increased by 24 cents, or 0.3%, to $81.40.

On Tuesday, both benchmarks increased by more than a dollar a barrel as the U.S. currency fell as expectations for additional interest rate hikes decreased as a result of weaker U.S. job data. Demand is increased as a result of investors holding other currencies paying less for dollar-denominated oil.

According to market sources citing American Petroleum Institute data on Tuesday, U.S. crude stocks decreased by around 11.5 million barrels in the week ending August 25. Prior to the release of the data, Reuters surveyed analysts who predicted an average draw of 3.3 million barrels.

Investors bought futures at the same time due to worries about Hurricane Idalia, which is currently churning over the Gulf of Mexico to the east of significant U.S. oil and natural gas production facilities.

The Energy Information Administration (EIA) estimates that the offshore Gulf of Mexico produces 5% of the nation’s natural gas and 15% of its oil.

Even though some of its employees were evacuated from the area, Chevron Corp.’s Gulf of Mexico operations continued to produce oil.

The API data revealed that while crude oil stockpiles shrank, petrol inventories increased by roughly 1.4 million barrels and distillate fuels, such as diesel and jet fuel, increased by almost 2.5 million barrels.

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