Oil climbs 1% after US crude stocks signal tighter supply

Oil climbs 1% after US crude stocks signal tighter supply

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Oil prices rose at the start of Asian trading on Wednesday after industry data showed a draw in U.S. crude and fuel inventories, stoking supply concerns and offsetting concerns about slowing demand in top importer China.

Brent crude futures were up 89 cents, or 0.9%, at $105.86 a barrel by 0223 GMT. West Texas Intermediate crude futures were up 97 cents, or 1%, at $103.38 a barrel.

The European Union is working on new sanctions on Russia for its war on Ukraine against Moscow’s oil industry, news broke on Tuesday.

European Commission President Ursula von der Leyen is expected to detail the plans on Wednesday, officials said.

U.S. crude and fuel inventories fell last week, market sources said, citing data from the American Petroleum Institute. Crude inventories fell by 3.5 million barrels in the week to April 29, more than the 800,000 barrels expected in a Reuters poll, sources said.

“The API report made people worry about the demand side and start worrying about the supply side again,” said Phil Flynn, an analyst at Price Futures Group.

U.S. government inventory data will be released on Wednesday.

In the previous session, China’s prolonged COVID-19 lockdown restricted travel plans for the Labor Day holiday, leading to demand concerns that sent prices down more than 2%.

Caroline Bain, chief commodities economist at Capital Economics, said in a report that the global manufacturing purchasing managers’ index contracted in April for the first time since June 2020, with China’s lockdown being a The key factor.

“Commodity demand is clearly negative,” she said, adding that rising inflation and rising interest rates are starting to weigh on spending.

“While supply constraints are likely to keep commodity prices high for some time, we believe weaker demand will weigh on most prices later this year and into 2023,” Bain said.

On Thursday, the Organization of the Petroleum Exporting Countries and its allies were expected to stick to their policy of increasing output each month, even though the group known as OPEC+ fell short of its output target beyond February in the October-March period.

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