Oil Prices Rise Amid U.S. Inventory Draw and Middle East Tensions

Oil prices increased in Asian trading on Wednesday as recent losses were recovered, largely due to unexpected data showing a draw in U.S. inventories while the Middle East conflict continued to be a concern.

Markets are anticipating several key economic readings and central bank meetings in major economies, which will potentially impact oil demand projections.

Brent oil futures for December were up 0.5% at $71.50 a barrel, and West Texas Intermediate crude futures gained 0.6% to $67.63 a barrel as of 00:11 ET (04:11 GMT).

Both oil contracts experienced significant declines earlier this week; however, reduced fears of severe escalation in the Middle East following a less impactful Israeli strike on Iran provided some relief. Nonetheless, Israel's offensives against Hamas and Hezbollah continue, with no clear signs of a ceasefire.

U.S. Inventories See Weekly Draw – API

According to the American Petroleum Institute, U.S. oil inventories fell by 0.57 million barrels in the past week, contrasting with an anticipated increase of 2.3 million barrels. This trend often reflects similar findings in the official inventory data, which is to be released later on Wednesday, alleviating some concerns in the oil markets about supply levels in the world's largest fuel-consuming nation.

Despite the inventory draw, U.S. oil demand is projected to decrease as winter leads to reduced travel, compounded by ongoing economic pressures from persistent inflation and high interest rates. The upcoming presidential elections also add uncertainty for the market, with Donald Trump and Kamala Harris competing, both pledging to increase U.S. oil production as part of their campaigns.

Economic Data and Central Bank Meetings in Focus

Critical economic data from various major economies is forthcoming, alongside significant central bank meetings.

On Wednesday, GDP data for the third quarter from both the euro zone and the U.S. will be released. On Friday, the PCE price index, the Federal Reserve’s preferred gauge of inflation, and nonfarm payroll data will also be published.

These data releases precede the Fed meeting next week, where a rate cut of 25 basis points is widely anticipated.

In Asia, data from China’s purchasing managers index is set for Thursday, and a National People's Congress meeting next week may indicate plans for heightened fiscal spending. The Bank of Japan will also decide on interest rates on Thursday amid increased political uncertainty, while the Reserve Bank of Australia will meet the following week.