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Investing.com-- Oil prices advanced in Asian trade on Wednesday, extending a recent rebound as signs of supply disruptions in the Middle East persisted, while industry data pointed to another week of sharp builds in U.S. product inventories.
Crude prices saw a whipsaw start to the week, falling sharply on Monday as Saudi Arabia slashed the prices on its oil sales in the face of weakening demand.
But prices then rebounded amid some hopes that oil markets will tighten due to disruptions in Middle Eastern supply, as the Israel-Hamas war raged on and as Libya suspended output at its biggest oilfield.
Brent oil futures expiring in March rose 0.3% to $77.82 a barrel, while West Texas Intermediate crude futures rose 0.3% to $72.50 a barrel by 20:18 ET (01:18 GMT). Both contracts were now back in sight of levels seen before a sharp drop at the beginning of the week.
Oil prices were nursing an over 10% drop in 2023, as concerns over weak demand and less-tight markets battered prices through most of the year.
US inventories set for weekly draw, but product stockpiles surge again- API
Data from the American Petroleum Institute showed that U.S. inventories saw a draw of 5.2 million barrels in the week to January 5, much more than expectations for a draw of 1.2 million barrels.
The reading follows another outsized draw seen in the final week of 2023, as U.S. refiners ramped up exports to fill a supply gap stemming from disruptions in the Middle East.
But the API data also showed another week of strong builds in gasoline and distillates inventories, indicating that demand in the world’s largest fuel consumer remained weak. This notion was exacerbated by a massive winter storm battering several parts of the country, further limiting road travel.
U.S. fuel demand has weakened substantially in recent months, largely due to adverse weather during the winter season. This saw U.S. gasoline prices slump to over two-year lows.
The API data usually heralds a similar reading from official inventory data, which is due later on Wednesday.
Weakening U.S. fuel demand added to concerns that global oil demand will weaken in 2024, which, along with relatively strong supplies, bodes poorly for oil prices.
Saudi Arabia’s price cuts factored into concerns over weakening oil demand, as did a string of weak economic readings from top importer China.
Strength in the dollar also weighed on oil prices, as the greenback rebounded in anticipation of key U.S. inflation data that is widely expected to factor into monetary policy.
Chinese inflation data is also on tap this week, while trade data is expected to provide more cues on the country’s oil imports, which have slowed in recent months.
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