Oil Prices Hike on US Glut and Chinese Stimulus Hope

25 Jan 2024 , 10:30 AM

The report revealed that U.S. crude stockpiles dropped more than anticipated last week, while the Chinese central bank’s reduction in banks’ reserve requirement bolstered expectations of additional stimulus and an economic rebound. As a result, oil prices increased on Thursday.

The March contract for Brent crude increased by 20 cents, or 0.3%, to $80.24 a barrel. The price of a barrel of U.S. West Texas Intermediate crude increased by 22 cents, or 0.3%.

According to the Energy Information Administration, U.S. crude stockpiles fell by 9.2 million barrels last week, more than quadrupling the 2.2 million barrel decrease that analysts had predicted in a Reuters poll.

The draw was caused by a sharp decline in US oil imports when refineries were closed and drivers were kept off the road by the winter.

Due to oil wells freezing amid an Arctic freeze, U.S. crude output dropped from a record-tying 13.3 million barrels per day (bpd) two weeks ago to a five-month low of 12.3 bpd last week.

Hopes for China’s economic revival also contributed to the rise in oil prices.

The announcement of a significant reduction in bank reserves by China’s central bank on Wednesday will infuse the banking system with approximately $140 billion in cash and send a strong signal of support for a faltering economy and collapsing stock markets.

In another attempt to alleviate the liquidity bottleneck that besets struggling real estate companies, China announced on Wednesday that it is expanding the applications for bank loans secured by commercial real estate.

Middle East geopolitical tensions continued to be the main topic of discussion.

Maersk said explosions nearby forced two ships operated by its U.S. subsidiary and carrying U.S. military supplies to turn around when they were transiting the Bab al-Mandab Strait northbound accompanied by the U.S. Navy.

Further strikes by the U.S. military in Yemen early on Wednesday resulted in the destruction of two Houthi anti-ship missiles that were headed towards the Red Sea and getting ready to launch, the U.S. military reported.

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