Oil prices edged higher on Wednesday, with West Texas Intermediate shaking off early weakness following the Energy Information Administration report on an unexpected draw on US oil inventories. At the time of writing, WTI is trading 0.38% higher at $83.35 and has travelled between a low of $80.81 and a high of $83.45.
WTI climbed on the back the EIA reporting US oil inventories falling by 0.4-million barrels last week, while analysts, on average, expected a 1.9-million-barrel rise, according to a Reuters poll. The American Petroleum Institute's weekly survey on Tuesday reported a 3.3-million-barrel rise.
US crude stocks fell by 431,000 barrels in the most recent week, the US Energy Information Administration said, against expectations for an increase, and gasoline stocks plunged by more than 5 million barrels as refiners cut processing due to maintenance.
US stocks at the Cushing, Oklahoma delivery hub hit their lowest level since October 2018. Gasoline stocks are now at their lowest since November 2019, the EIA said.
Additionally, the Organization of the Petroleum Exporting Countries maintains a slow increase in supply rather than intervening to add more barrels to the market. This has occurred at the same time that US demand has ramped up.
Oil prices have enjoyed a combination of factors, one of which is China's switch from coal to oil to prove electricity. However, overnight, the market had softened overnight after the Chinese government seeks to ensure coal mines operate at full capacity as Beijing moved to ease a power shortage.
''Saudi Arabia's minister of energy said users switching from gas to oil could account for the demand of 500,000-600,000 barrels per day, depending on winter weather and prices of other sources of energy,'' Reuters reported.
Meanwhile, ''oil markets continue to benefit as delta-variant risks have proved benign while growing departure levels suggest air traffic will continue to support jet fuel demand across both APAC and the US,'' analysts at TD Securities explained.
''This supports a tight supply-demand outlook that is particularly fueling upside momentum in Brent crude and heating oil, which can be exacerbated by up to 1 million bpd of incremental winter demand due to natural gas switching for crude and fuel oils. This informs our long-short heating oil-gasoline trade.''
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