Oil prices jumped at the start of Asian trading on Wednesday, despite fears about slowing demand from top importer China, after industry reports revealed drawdowns in U.S. crude and fuel stockpiles, heightening supply concerns and offsetting concerns about slowing demand from China.
By 0223 GMT, Brent crude futures had risen 89 cents, or 0.9 percent, to $105.86 a barrel. The price of West Texas Intermediate crude futures increased by 97 cents, or 1%, to $103.38 a barrel.
The advances follow reports on Tuesday that the European Union is working on fresh sanctions against Russia for its involvement in the Ukraine conflict, which will target the Russian oil industry.
Officials say European Commission President Ursula von der Leyen will lay out the ideas on Wednesday.
According to market sources quoting American Petroleum Institute numbers, oil and fuel stockpiles in the United States dropped last week. Crude stocks fell by 3.5 million barrels for the week ending April 29, according to sources, exceeding a Reuters poll’s prediction of an 800,000-barrel reduction.
“People stopped thinking about the demand side and started worried about the supply side again as a result of the API data,” said Phil Flynn, an analyst with Price Futures Group.
On Wednesday, the US government will provide data on stocks.
Demand concerns coming from China’s protracted COVID-19 lockdowns, which disrupted travel plans throughout the Labor Day holiday season, caused prices to decrease by more than 2% in the previous session.
According to Caroline Bain, chief commodities economist at Capital Economics, China’s lockdowns were a crucial factor in the global manufacturing PMI contracting in April for the first time since June 2020.
The Organization of Petroleum Exporting Countries and their Allies are anticipated to stick to their policy of increasing monthly production on Thursday, even though the group, known as OPEC+, has consistently undershot output objectives from October to March, except February.
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