Oil Prices Rise as US Crude Stockpiles Fall and China Implements Stimulus Measures
Oil prices experienced an increase on Thursday following the release of data showing a larger-than-expected decline in US crude stockpiles. Additionally, the Chinese central bank’s decision to cut banks’ reserve ratio added to hopes of economic recovery and further stimulus measures. Brent crude futures rose by 1.2 percent to $81.01 a barrel, while US West Texas Intermediate crude increased by 1.4 percent to $76.12 a barrel.
Analysts at Fujitomi Securities, including Toshitaka Tazawa, attributed the rise in oil prices to the significant drop in US oil inventories and expectations of China’s economic recovery. Tensions in the Middle East also played a role in the increase.
The Energy Information Administration reported that US crude stockpiles fell by 9.2 million barrels last week, surpassing the Reuters poll’s expectation of a 2.2 million-barrel draw. The decline was driven by a sharp decrease in US crude imports due to winter weather conditions that led to refinery closures and reduced travel.
The hope for China’s economic recovery also contributed to the rise in oil prices. The Chinese central bank’s decision to inject approximately $140 billion into the banking system through a deep cut in bank reserves signaled strong support for the fragile economy and declining stock markets.
Geopolitical tensions in the Middle East remained a focus, but the impact on price gains was limited as risk premiums had already been factored in, according to Priyanka Sachdeva, a senior market analyst at Phillip Nova brokerage firm. Sachdeva stated that while there is no actual damage to crude oil supplies, there is anticipation that the situation in the Red Sea could disrupt oil flow from the producing region.
In a recent shipping incident, two ships operated by Maersk’s US subsidiary, carrying US military supplies, were forced to turn around in the Bab al-Mandab Strait off Yemen due to nearby explosions.
Overall, the combination of falling US crude stockpiles, expectations of China’s economic recovery, and geopolitical tensions in the Middle East contributed to the increase in oil prices.
By Noah Browning
