Oil field workers on a rig in Tioga, North Dakota.
Ken Cedeno | Corbis | Getty Images
Oil prices edged higher on Wednesday shaking off earlier losses as investors monitored U.S. stockpile data, China’s economy and geopolitical tensions in the Middle East.
The West Texas Intermediate futures contract for March was last up 80 cents, or 1.08%, to trade $75.17 a barrel. The Brent futures contract March gained 64 cents, or 0.75%, to trade at $80.15 a barrel.
The two benchmarks traded negative earlier in the session as U.S. gasoline stocks surged by 7.18 million barrels for the week ending Jan. 19, according to the American Petroleum Institute.
Surging gasoline stocks offset a crude oil inventory draw of 6.67 million barrels, suggesting demand might be faltering in the world’s largest economy.
China, however, provided some support as the central bank pledged Wednesday to slash the amount of liquidity that the nation’s financial institutions are required to hold in an effort boost economic growth.
Traders have worried for months that oil supply will outstrip demand in 2024 as China’s economy slows.
“Oil is being supported as China is taking steps to try to shock and awe its beleaguered economy out of a tailspin,” Phil Flynn, an analyst at the Price Futures Group, wrote in a Wednesday note.
“Talk of a big rescue package is making the rounds and steps today by the Chinese government suggest that that could be coming sooner rather than later,” Flynn wrote.
On the supply side, Libya restarted production Sunday at the Sharara oilfield, which has the capacity to produce 300,000 barrels per day. The oilfield was shut down for two weeks due to protests.
And oil output is slowly recovering in North Dakota after winter storms hit production this month in the third-largest crude producing state in the U.S. Crude production was down 250,000 to 300,000 barrels per day on Tuesday, compared to 700,000 bpd last Wednesday, according to the state pipeline authority.
Oil prices should remain range bound in the first quarter of 2024 barring a significant escalation in the conflict in the Middle East, according to Vikas Dwivedi, an oil and gas strategist at Macquarie.
Brent should remain in a range of $72 to $82 unless supply is materially affected in the Middle East, Tamas Varga, an analyst with PVM Oil Associates, wrote in a note Wednesday.
Geopolitical risk is largely already factored into prices, according to Dwivedi. “Without current geopolitical tensions, we believe crude would sell off meaningfully,” the analyst said.
The market is waiting for the Energy Information Agency to release the latest weekly U.S. crude supply data at 10:30 am ET.
