Oil prices bounced back on Wednesday from the 2022 low, after unexpected US crude and fuel stockpiles drawdowns. Of course, the US dollar return from above 114.70 under 113 also help the Oil price recover with less-expensive US dollar.
According to the EIA weekly report, US crude stocks fell by 215,000 barrels in the week ended 23rd September, while gasoline inventories declined by 2.4 million barrels and distillate inventories by 2.9 million barrels. The main reason for this decline could be the lower refining activity after several outages, such as the Gulf of Mexico, shut down, due to Hurricane Ian, according to US government production figures.
The energy market is challenged by many tensions
These data also show that demand is rebounding after some weeks of softness. Also, despite the decrease in refining activities, refiners are running with 90.6% of their overall capacity, which is the highest for this period of the year in the US since 2012, as both domestic and export demands are increasing.
During the past weeks, the oil price was declining as stock markets across the globe got weaker and it is expected to get cheaper because now analysts are betting on stricter central bank policies, which can cause a more severe economic recession.
Borrowing cost with increasing bond yields is raising, and it caused the Bank of England to announce that they will buy 65 billion pounds of UK bonds to stem the rout, however, the stock market had a very negative reaction and tested two-year low all across the globe.
On the geopolitical front, tensions create uncertain conditions ahead of the OPEC+ meeting on October 5, which is expected to end with an output cut of around 1 million barrels per day.
Reports about the Nord-stream pipeline sabotage show that both Europeans and Russians blame each other for it. While Swedish and Danish seismologists identified two separate explosions, each equivalent to 100 kilograms of dynamite, leading their respective governments to conclude that the pipes were deliberately attacked by Russia or Russian-affiliated agents, the Kremlin called the “stupid” idea that Russia could be behind this sabotaging. No matter who must be blamed, this sabotage in line with an earlier report about Gazprom’s announcement on Tuesday that it may stop paying Ukraine for transit of its gas, increased the tension level and Gas price as well, especially in Europe.
After these reports and tensions, oil price raised more than 6.7% from the 2022 low to above $81. From the technical point of view, oil prices returned to the uptrend in the H1 chart, but in the bigger picture and Daily chart, the overall trend is still downward.