By Ambar Warrick
Investing.com-- Oil prices rose on Wednesday, recovering from recent losses as signs of a bigger-than-expected draw in U.S. crude inventories offset concerns over plans by the White House to increase supply in the near-term.
Data from the American Petroleum Institute showed that U.S. crude inventories unexpectedly fell by about 1.3 million barrels in the week to October 14. Data from the Energy Information Administration, due later today, is expected to show a rise of around 1.4 million barrels.
The data indicates that oil consumption in the U.S. remains steady despite headwinds from rising inflation and interest rates, and that the Biden administration faces an uphill battle to bring crude prices under control.
London-traded Brent Oil Futures rose 0.9% to $90.86 a barrel, while U.S. West Texas Intermediate crude futures rose 1.4% to $83.22 a barrel by 22:15 ET (02:15 GMT). Both contracts fell 1% and 3% on Tuesday, on fears of increased U.S. supplies.
The White House late on Tuesday revealed plans to release 15 million barrels of oil from its Strategic Petroleum Reserve by December, and also opened the possibility of more releases if market conditions required it.
The government also said it will only begin replenishing the reserve by buying crude when prices fall below $67 to $72 a barrel.
The move comes in response to a recent supply cut by the Organization of Petroleum Exporting Countries and its allies (OPEC+), which had sparked a strong rally in crude prices. The move is also intended to bring down gasoline prices in the U.S. ahead of the midterm elections.
But given that drawdowns by the government drove the SPR to a near 40-year low this year, markets were unsure over how much control the Biden administration could be able to exert over crude prices.
Most OPEC+ members have also brushed off U.S. criticism and voiced support for the recent production cut. A weaker dollar, as it retreated from 20-year highs, also benefited oil prices this week.
Still, oil prices also have to contend with slowing global demand, which was the biggest source of selling pressure this year. Slowing growth in China severely dented the country’s massive oil imports, driving prices off 2022 highs.
The Chinese government recently stated that it has no intention of scaling back its zero-COVID policy. Lockdowns to combat COVID outbreaks are at the heart of China’s economic woes this year.