Oil prices rebound as bullish inventory draw helps risk sentiment
Investing.com — Crude oil prices rebounded Thursday after the previous session’s sharp losses, as worries over tight global supplies offset the hit to risk sentiment caused by the downgrade of the U.S. credit rating.
By 09:10 ET (13.10 GMT), the U.S. crude futures traded 1.1% higher at $80.34 a barrel, while the Brent contract climbed 0.8% to $83.89.
Both benchmarks closed 2% lower on Wednesday after ratings agency Fitch cut the U.S.’s top-level AAA credit rating, citing the country’s high and growing government debt burden.
Crude markets have had a good run of late, with both benchmarks around 10% higher over the course of the last month, and this hit to sentiment prompted a pullback.
However, sentiment stabilized after data from the Energy Information Administration recorded the largest drop in stocks according to records dating back to 1982.
“The weekly petroleum status report … was constructive for the oil market and shows that US commercial crude oil inventories dropped by a record 17MMbbls over the last week to 439.8MMbbls, the lowest since January and around 1% below the five-year average for this time of the year,” analysts at ING said, in a note.
This hefty drop illustrated the tight nature of global supply, which has been exacerbated by steep production cuts by major suppliers this year.
Focus is now on an upcoming meeting of the Organization of Petroleum Exporting Countries on Friday. Saudi Arabia, the de facto leader of the cartel, is expected to extend a 1 million barrel per day supply cut into September.
Production cuts by Saudi Arabia and Russia were the biggest boost to oil prices, with global supplies set to tighten substantially in the remainder of the year. The move was done in order to offset an
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