Oil prices rise due to drop in US crude stocks

2 September 2020 (Last Updated September 2nd, 2020 11:44)

Crude oil prices have edged higher after energy group American Petroleum Institute (API) reported a drop in the US crude inventory.

Oil prices rise due to drop in US crude stocks
Brent crude oil futures rose by $0.45 to $46.03 a barrel, Reuters reported. Credit: Steve Jurvetson.

Crude oil prices have edged higher after energy group American Petroleum Institute (API) reported a drop in the US crude inventory.

The prices were also supported by strong data of US and Chinese factory activities, increasing hopes of a recovery from the Covid-19 pandemic.

Brent crude oil futures rose by $0.45 to $46.03 a barrel while US West Texas Intermediate (WTI) crude futures increased by $0.43 to reach $43.19 a barrel, Reuters reported.

Data released by the API showed a fall in the US crude stocks by 6.4 million barrels to 501.2 million barrels in the week ending 28 August. It also showed a 5.8 million barrels drop in the gasoline stocks.

Nissan Securities research general manager Hiroyuki Kikukawa was quoted by the news agency as stating: “A bigger-than-expected draw in the US stockpiles and growing hope for an economic recovery in the United States and China after healthy factory data prompted buys in oil futures.”

According to market data, US manufacturing activity increased to above a 1.5-year high last month due to new orders. This provided support to Wall Street and oil markets.

Meanwhile, factory activity in China also expanded to a decade high last month. The reason for the increase was attributed to new export orders this year as Chinese manufacturers ramped up production, according to a private survey.

Fujitomi chief analyst Kazuhiko Saito said: “Slower-than-expected resumption of oil output in the United States after Hurricane Laura raised concerns over tighter supply.”

The US Department of Interior reported that 71 of the Gulf of Mexico’s 643 manned platforms remained shut in the aftermath of Hurricane Laura. The count is down from 117 production platforms on 31 August.

A Reuters survey found that oil output by the Organization of the Petroleum Exporting Countries (OPEC) increased by around one million barrels per day last month.