Oil prices rebounded on Thursday as unexpected drawdowns in U.S. crude and gasoline inventories provided support, despite indications that the U.S. Federal Reserve may maintain higher interest rates for an extended period.
Brent crude futures for May gained 55 cents, or 0.6%, to reach $86.50 a barrel by 0400 GMT, recovering from a 1.6% decline on Wednesday.
U.S. West Texas Intermediate (WTI) futures for May rose by 47 cents, or 0.6%, to $81.74 a barrel, following a drop of about 1.8% in the previous session.
According to the U.S. Energy Information Administration (EIA), crude inventories in the United States, the world’s largest oil consumer, fell for the second consecutive week. Stockpiles unexpectedly decreased by 2 million barrels to 445 million barrels in the week ended March 15, contrasting with analysts’ forecasts of a 13,000-barrel rise.
Yeap Jun Rong, market strategist at IG, noted, “It seems that the bullish mantra is still intact, with yet another unexpected drawdown in U.S. crude inventories last week while market participants continue to price for the risks of further supply disruption on the Russia-Ukraine front.
The decline in stockpiles coincided with a rise in exports and increased activity among refiners. Gasoline inventories also saw a seventh consecutive week of decline, dropping by 3.3 million barrels to 230.8 million, indicating consistent strong fuel demand.
Furthermore, oil refinery runs increased by 127,000 barrels per day, accompanied by a rise in utilization rates.
The inventory data provided some support to the market after prices dipped the day before due to a mixed outlook from Fed policymakers. Although the Federal Reserve maintained interest rates in the 5.25% to 5.50% range, policymakers barely adhered to an outlook for three rate cuts this year, implying that borrowing costs may remain elevated for a prolonged period.
However, concerns persist regarding Ukrainian attacks on Russian refineries and their potential impact on global petroleum supplies. ANZ Research highlighted, “The market remains wary of ongoing supply side issues. The Ukrainian drone strikes that took out 12% of Russia’s total oil processing capacity are likely to tighten the market amid the ongoing cutbacks from OPEC.
Ukraine’s recent attacks on Russian oil infrastructure have resulted in the shutdown of approximately 7% of Russian refining capacity, equivalent to around 370,500 barrels per day. Analysts suggest that extended disruptions could compel Russian producers to reduce supply if they face constraints in exporting crude oil or encounter storage limitations.