Thu. Jun 20th, 2024

Oil rose to the highest level in eight weeks as falling U.S. inventories, Chinese stimulus and an attack on a Russian refinery helped crude push higher.

West Texas Intermediate topped US$76 a barrel, touching its highest price since Dec. 1. U.S. crude inventories fell by more than nine million barrels last week to the lowest level since October. Total oil stockpiles nationwide had the biggest weekly decline since 2016 as freezing weather curtailed supply and boosted demand for heating fuels.

Oil is showing tentative signs of breaking out of the narrow band it has traded in all year. Geopolitical tensions in the Red Sea that have roiled global trade have until now been largely offset by concerns that crude supply growth will remain robust from non-OPEC producers.

Wednesday’s U.S. inventory data “seems to have been the trigger for what looks like a technical breakout,” said Ole Hansen, head of commodities strategy at Saxo Bank AS. “A succession of higher lows this past month has shown how limited the selling appetite was for fears of a geopolitical escalation.”

Elsewhere, a fire damaged a major refinery on Russia’s Black Sea coast Thursday. The site was hit by a drone attack, a Ukrainian official speaking on condition of anonymity said.

In China, the government said it will cut the reserve-requirement ratio for banks within two weeks and hinted that more support measures could follow, aiding the outlook for energy consumption in the largest crude importer.

“With the issues around the Red Sea remaining worrisome, it has not taken much from the macro world to keep a little simmer in oil’s pot,” said John Evans, an analyst at brokerage PVM. “Stimulus in any form from China is normally greeted warmly in oil markets.”

Citigroup Inc. warned that Brent could “pop” to $90 a barrel if the tensions spiral, although the bank cautioned that’s not its base-case outlook.

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