Oil prices rose by more than 1 per cent on Wednesday, recovering some of the losses from the previous day. This increase was driven by a decline in U.S. crude inventories and concerns over Hurricane Francine potentially disrupting U.S. production, which helped offset worries about weak global demand.

According to the latest data from the American Petroleum Institute (API) released on Tuesday, U.S. crude stocks dropped by 2.793 million barrels. Gasoline inventories decreased by 513,000 barrels, while distillates inventories saw a slight increase of 191,000 barrels.

At 0807 GMT, Brent crude futures were up by $1.10, or 1.6 per cent, reaching $70.29 a barrel. Meanwhile, U.S. crude futures gained $1.11, or 1.7 per cent, climbing to $66.86.

Tamas Varga of oil broker PVM remarked, "The API provided some comfort as it showed a sizable decline in crude oil stocks, a forecast-beating draw in gasoline, and a tiny build in distillate inventories."

On Tuesday, both oil benchmarks experienced significant drops, with Brent crude falling below $70 to its lowest level since December 2021, and U.S. crude dropping to its lowest point since May 2023. This decline came after OPEC revised its 2024 oil demand growth forecast downward for the second time.

Analysts also noted that concerns about Hurricane Francine potentially disrupting output in the U.S., the world's largest producer, contributed to the rebound. Yuki Takashima, an economist at Nomura Securities, stated, "The market rebounded autonomously as Tuesday's drop was substantial," adding that supply disruption fears from Francine also supported the market.

The U.S. Bureau of Safety and Environmental Enforcement (BSEE) reported that about 24 per cent of crude production and 26 per cent of natural gas output in the U.S. Gulf of Mexico were offline due to the storm.

Following the API's report on Tuesday, official inventory figures from the U.S. government are expected at 1430 GMT. Eleven analysts surveyed by Reuters predicted that crude inventories would have increased by approximately 1 million barrels, while gasoline stocks were anticipated to have fallen by 100,000 barrels.

Source: Reuters