FX.co ★ Oil prices rally after release of inventory data

On Wednesday, global oil prices were rising in the morning, later they were declining in the afternoon, and at the end of the day they surged due to the release of US data on a sharp decline in oil reserves.

Fluctuations during the day were caused by mixed factors. On the one hand, investors expect an increase in demand for oil products in China after the lifting of restrictions. On the other hand, they are seriously concerned that the global economy will significantly weaken in the coming months.

Brent crude oil January futures grew by 0.75% up to $95.36 per barrel at London's ICE Futures Exchange.

Crude oil WTI December futures rose by 0.78% up to $89.07 per barrel at the electronic trading on the New York Mercantile Exchange.

Speculations that China may soon relax its zero COVID strategy turned out to be rumors. No real facts confirmed them. On the contrary, the news came that the COVID-19 restrictions in China continued. On Wednesday, the local authorities announced a 7-day lockdown of the Zhengzhou Airport Economy zone which housed the world's largest iPhone factory.

According to data released yesterday by the American Petroleum Institute (API), US oil inventories fell sharply by 6.53 million barrels over the past week. Distillate inventories rose by 0.86 million barrels.

Official inventory data from the US Department of Energy showed that US commercial oil inventories dropped significantly by 3,115,000 barrels to 436.83 million barrels last week. Commercial gasoline stocks decreased by 1,257,000 barrels, while commercial distillate stocks climbed by 427,000 barrels.

Experts did not expect such a drastic reduction in stocks. They predicted a reduction only by 200,000 barrels. Gasoline inventories were also expected to decline by 1,000,000 barrels and distillate inventories by 500,000 barrels.

This news and rumors of growing tensions in the Persian Gulf (Saudi Arabia is concerned about Iranian attack) pushed the quotes up.

On Wednesday, the major market event was the Fed's decision on the interest rate hike. Although market participants accepted its growth by 75 basis points, they awaited Jerome Powell's speech with his comments on the future monetary policy.

Overall, there are fears that a key rate hike will eventually cause a recession in advanced economies. If that happens, it is clear that demand for oil and petroleum products will fall.