Oil prices rose for a second day on Wednesday, recouping recent losses as the US dollar eased off recent gains and fuel inventory figures fell.
Brent crude futures rose $3.05, or 3.5%, to $89.32 per barrel, while US West Texas Intermediate (WTI) crude futures rose $3.65, or 4.7%, to $82.15 per barrel.
On Wednesday, the US Dollar reached a new two-decade high against a basket of currencies before retreating.
A strong dollar lowers the demand for oil by making it more expensive for buyers who use other currencies. The US Dollar Index was down 0.9%.
According to inventory data, consumer demand in the United States has recovered, though refining product supply has remained 3% lower over the last four weeks than a year ago.
The Energy Information Administration reported a crude oil inventory draw of 215,000 barrels for the week ending September 23 on Wednesday. In the previous week, inventories increased by 1.1 million barrels.
The surprise draw Wednesday came after the American Petroleum Institute (API) had estimated a 4.15-million-barrel build for the week to September 23, catching the market off guard.
Meanwhile, gasoline inventories declined by 2.4 million barrels and distillate inventories by 2.9 million barrels, as refining activity declined following several outages.
Also contributing to the surge in oil prices was the 11 per cent of output shuttered in the Gulf of Mexico as Hurricane Ian made its way toward the Florida coast.
Goldman Sachs cut its 2023 oil price forecast on Tuesday due to expectations of weaker demand and a stronger US Dollar but said global supply disappointments only reinforced its long-term bullish outlook.
Oil prices have been on the slide in the past few days as aggressive US Federal Reserve policy sent the Dollar soaring. However, prices have started reversing the trend prompted by the shutdown of offshore production in the Gulf of Mexico ahead of Hurricane Ian.
Expectations that the Organisation of the Petroleum Exporting Countries and allies (OPEC+) will agree to oil production cuts at its next meeting next week also served to lend some support to oil prices in the past few days.
OPEC’s latest production figures showed the total was 3.58 million barrels per day below targets; Russia’s exports are seen dropping by 2.4 million barrels per day next year, and US producers are staying cautious about production growth.
On the bearish side, a recession could offset much of the bullish potential, and analysts see the chances of a recession in the US at between 45 per cent for the next 12 months and 55 per cent for the next 24 months.
