(Bloomberg) — Oil rose to trade near a one-month high after US inventories fell far more than expected and China unveiled additional stimulus.
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West Texas Intermediate climbed above $75 a barrel after hitting the highest since Dec. 26 in intraday trade on Wednesday, while Brent topped $80. US inventories fell by more than 9 million barrels last week, six times more than forecast, to hit the lowest level since October.
In China, the government said it will cut the reserve-requirement ratio for banks within two weeks and hinted that more support measures could follow, aiding the outlook for energy consumption in the largest crude importer.
Oil has struggled to break out of a narrow range this month, with geopolitical tensions in the Red Sea that have roiled global trade offset by concerns that crude supply growth will remain robust from non-OPEC producers. In a reminder of the elevated risks in the Middle East, the US navy intercepted attacks on two container ships fired by Iran-backed Houthi rebels in Yemen.
“The EIA inventory drop could well have been an anomaly given the abnormally cold weather recently, which disrupted production,” said Charu Chanana, market strategist at Saxo Capital Markets Pte. However, non-OPEC supply continues to offset the Mideast concerns, suggesting that oil could be rangebound until there’s greater clarity on the outlook for global growth, she added.
Multiple tensions across the Middle East have tested oil traders’ nerves in recent months as the Hamas-Israel war drags on and Iran raises its profile, often via proxies but also striking targets in Iraq and Pakistan itself. US forces have been active the Red Sea, and struck Iran-backed militia in Iraq.
Citigroup Inc. warned that Brent could “pop” to $90 a barrel if the tensions spiraled, although the bank cautioned that wasn’t its base-case outlook.
WTI’s prompt spread — the difference between its two nearest contracts — has widened to 11 cents a barrel in backwardation, a bullish market structure. That compares with 7 cents in contango — the opposite pattern — two weeks ago.
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