Oil prices edged up on Wednesday as a bigger-than-expected US crude storage withdrawal, Chinese economic stimulus and geopolitical tensions countered concerns over tepid demand. China’s central bank will cut the amount of cash that banks must hold as reserves from February 5, in a move expected to shore up a fragile economic recovery.
Brent futures were up 15 cents, or 0.2 per cent, to $79.70 a barrel, while US West Texas Intermediate (WTI) crude was up 31 cents, or 0.45 per cent, to $74.68, according to news agency Reuters. Back home, on the Multi Commodity Exchange (MCX), crude oil futures due for a February 16 expiry, was last trading 1.81 per cent higher at ₹6,290 per bbl, having swung between ₹6,160 and ₹6,294 per bbl during the session, against a previous close of ₹6,178 per barrel.
What’s driving crude oil prices?
-In the US, the Energy Information Administration (EIA) said energy firms pulled a much bigger-than-expected 9.2 million barrels of crude from stockpiles during the week ended January 19. Geopolitical tensions, which have led to a massive displacement in global trade, remained in focus.
-A coalition of 24 nations led by the US and UK conducted new strikes against Houthi fighters in Yemen on Tuesday. The strikes were aimed at stopping the Houthis’ attacks on global trade, Britain said in a joint statement.
-The US said Iran-aligned Houthis have mounted 26 attacks since late November on commercial shipping in the Red Sea, a shipping lane used by about 12 per cent of global oil trade before the attacks.
-US also carried out strikes against Iran-linked militia in Iraq on Tuesday, following an attack on an Iraqi air base that wounded forces. Israel and Hamas have made some progress toward agreement on a 30-day ceasefire in Gaza when Israeli hostages and Palestinian prisoners would be released.
Coming to demand worries, In Europe, euro zone businesses faced a tough start to 2024 with activity contracting again in January as demand continued to fall while price pressures rose due to tensions in the Red Sea.
-Germany’s Ifo institute again downgraded its 2024 economic growth forecast, citing uncertainty caused by changes to the federal budget necessitated by a court ruling. In France, protesting farmers blocked several roads to press the government to loosen regulations and help protect them from cheap imports and rising costs.
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