Oil prices hit new peaks on Wednesday with the global Brent benchmark touching its highest since January after a steep drawdown in U.S. fuel stockpiles and Saudi and Russian output cuts offset concerns about slow demand from China.
Brent crude settled $1.38, or 1.6%, higher at $87.55 a barrel, its highest since Jan. 27.
West Texas Intermediate crude (WTI) closed $1.48, or 1.8%, higher at $84.40, at its highest since November 2022.
U.S. gasoline stocks fell by 2.7 million barrels last week, while distillate inventories, which include diesel and heating oil, dropped by 1.7 million barrels, government data showed, compared with analysts' expectations in a Reuters poll for both to hold mostly steady. [EIA/S]
"The draws in refined products continue to be bullish for the oil market," said Andrew Lipow, president at Lipow Oil Associates in Houston.
Markets largely shrugged off a higher-than-expected 5.85 million-barrel build in U.S. crude stocks after a record drawdown the week before.
The U.S. fuel stock drawdown helped offset some demand concerns after Chinese data on Tuesday showed crude oil imports in July fell 18.8% from the previous month to their lowest daily rate since January.
China's consumer sector also fell into deflation and factory-gate prices extended declines in July, as the world's second-largest economy struggled to revive demand.
Supporting prices, however, were top exporter Saudi Arabia's plans to extend its voluntary production cut of 1 million barrels per day for another month to include September. Russia also said it would cut oil exports by 300,000 bpd in September.
"The latest recovery is mainly driven by the pledge of major producers, like Saudi Arabia and Russia, to keep supply subdued for another month," said Charalampos Pissouros, senior investment analyst at broker XM.
Crude posted its sixth consecutive weekly gain last week, helped by a reduction in OPEC+ supplies and hopes of stimulus boosting oil demand recovery in China.
On Tuesday, Saudi Arabia's cabinet said it reaffirmed its support for precautionary measures by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to stabilise the market, state media reported.
Markets will also closely watch July's U.S. Consumer Price Index (CPI), due on Thursday, which is expected to show a slight year-over-year acceleration.
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