Oil prices rise on surprise drop in U.S. crude, fuel stocks

Oil

Oil prices rose on Wednesday following unexpected drawdowns in U.S. crude and fuel stocks, outweighing downward pressure from the continued strength in the U.S. dollar.

Brent crude futures were up $1.69, or 2%, at $87.96 per barrel by 10:41 a.m. EST (1441 GMT), while U.S. West Texas Intermediate (WTI) crude futures rose $2.14, or 2.7%, to $80.64 a barrel.

U.S. crude stocks fell by 215,000 barrels in the most recent week, while gasoline and distillate inventories declined by 2.4 million and 2.9 million barrels respectively, as refining activity declined following several outages. [EIA/S]

In the Gulf of Mexico, about 190,000 barrels per day of oil production, or 11% of the Gulf's total, was shut-in due to Hurricane Ian, according to U.S. government figures. Wholesale gasoline prices have been on the rise in the United States as well after refiners in the Midwest and West Coast shut.

Global equities pulled off two-year lows on Wednesday, after the Bank of England said it would step into the bond market to stem a damaging rise in borrowing costs, thereby dampening investor fears of contagion across the financial system.

The dollar hit a fresh two-decade peak against a basket of currencies on Wednesday as rising global interest rates fed recession concerns. A strong dollar reduces demand for oil by making it more expensive for buyers using other currencies.

Goldman Sachs cut its 2023 oil price forecast on Tuesday, due to expectations of weaker demand and a stronger U.S. dollar but said global supply disappointments only reinforced its long-term bullish outlook.

Producer group OPEC+ meets on Oct. 5, where Russia is likely to propose an output cut of around 1 million barrels per day, a source familiar with Russian thinking said on Tuesday.