© Reuters. Model of Oil barrels are seen in front of rising stock graph in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration/file photo
By Emily Chow and Jeslyn Lerh
SINGAPORE (Reuters) -Oil prices rebounded on Thursday as and gasoline stock drawdowns lent support despite signs that the U.S. Federal Reserve may keep interest rates higher for longer.
futures for May rose 55 cents, or 0.6%, to $86.50 a barrel by 0400 GMT, after falling 1.6% on Wednesday.
U.S. West Texas Intermediate futures for May climbed 47 cents, or 0.6%, to $81.74 a barrel, after sliding about 1.8% in the previous session.
Crude inventories in the United States, the world’s biggest oil consumer, fell for a second week, the U.S. Energy Information Administration (EIA) reported on Wednesday.
Stockpiles declined unexpectedly by 2 million barrels to 445 million barrels in the week ended March 15, versus analysts’ expectations in a Reuters poll for a 13,000-barrel rise. [EIA/S]
“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, said Yeap Jun Rong, market strategist at IG.
The stockpiles fell as exports rose and refiners continued to increase activity. Gasoline inventories fell for a seventh week, down by 3.3 million barrels to 230.8 million, and suggesting steadily strong fuel demand.
Oil refinery runs ramped up by 127,000 barrels per day and utilisation rates rose.
The inventory numbers gave some support to the market after prices drifted lower the day before on a mixed outlook by Fed policymakers.
While the U.S. central bank kept interest rates in the 5.25% to 5.50% range on Wednesday, policymakers barely kept to an outlook for three rate cuts this year, which suggested borrowing costs may stay higher for longer.
The higher rates over a longer period could mean reduced economic growth which would affect future fuel demand.
But continued concerns on how Ukrainian attacks on Russian refineries would impact global petroleum supplies are supporting prices as well.
“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,” ANZ Research said in a note, referring to the Organization of the Petroleum Exporting Countries.
Ukraine has stepped up attacks on Russian oil infrastructure with at least seven refineries targeted by drones this month, in a more than two-year long war. The attacks have shut down 7%, or around 370,500 barrels per day, of Russian refining capacity, according to Reuters calculations.
Analysts say prolonged disruptions could force Russian producers to reduce supply if they are unable to export crude oil and face storage constraints.