24 October 2018, News Wires — Oil edged higher towards $77 a barrel on Wednesday after hitting a two-month low, after a strong drawdown in U.S. gasoline and diesel inventories augured for a coming seasonal rebound in refining demand.
Traders were also focused on the return to looming U.S. sanctions on oil exporter Iran, balancing that against growing worries about weakening worldwide demand.
Brent crude was up 11 cents at $76.55 a barrel by 10:53 a.m. EDT (1453 GMT). The global benchmark fell earlier in the session to $75.11, lowest since Aug. 24.
U.S. West Texas Intermediate crude futures rose 45 cents at $66.87 per barrel, holding onto gains despite a larger-than-expected increase in U.S. stockpiles of oil.
U.S. crude inventories rose by 6.3 million barrels last week, the U.S. Energy Department said, more than the 3.7 million-barrel increase expected in a Reuters poll.
However, gasoline stocks fell 4.8 million barrels last week to 229.33 million, the lowest since December 2017, and distillates, which include diesel, were down 2.3 million barrels, both more than forecast.
U.S. gasoline futures rose 0.3 percent to $1.8418 a gallon.
“The headline number was a little bearish on crude but with the drop in gasoline supplies and an uptick in refinery runs, the market is holding in there pretty good,” said Phil Flynn, analyst at Price Futures Group in Chicago.
Refining utilization also rose modestly, a signal, Flynn said, that maintenance season is coming to a close, and refiners will begin to process more diesel and heating oil in coming weeks as winter approaches. That could offset some of the buildup in U.S. crude inventories that has taken place over the last five weeks.
However, the market slumped 5 percent on Tuesday amid growing concerns about a weaker outlook for economic growth and demand and easing supply worries.
Forecasters such as the International Energy Agency already expect slower oil-demand growth for 2019 due to a weaker economy.
“With geopolitical risk factors raising concerns over global instability and other external uncertainties risking demand for oil to take a hit, it would not be a surprise if WTI and Brent crude hold onto their recent losses,” said Lukman Otunuga, an analyst at futures brokerage FXTM.
Recent weakness in equities due to concern about the economic outlook has also weighed on crude of late; global stock indexes remained under pressure on Wednesday.
In a sign Iranian exports will drop further once U.S. sanctions take effect on Nov. 4, two people with direct knowledge of the matter said two Chinese state-owned refiners were not planning to load Iranian oil for November.
While the sanctions are expected to tighten supplies, other producers, notably top exporter Saudi Arabia, are willing to increase supply further if needed.
Saudi Energy Minister Khalid al-Falih said on Tuesday that Saudi Arabia would step up to “meet any demand that materializes to ensure customers are satisfied”.
Some analysts say nonetheless that prices could rebound before the end of the year.
“We still see Brent reaching $85 per barrel by year-end,” said U.S. bank Morgan Stanley.