Oil Prices Rebound as U.S. Crude Inventories Decline and Canadian Wildfires Impact Supply

Oil prices experienced a notable rebound on Wednesday, halting a three-day streak of losses. The uptick in prices was driven by a combination of decreasing U.S. crude inventories and heightened supply risks due to wildfires in Canada.

Brent crude futures for September increased by 40 cents, or 0.5%, reaching $81.41 per barrel by 0650 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude for September saw a rise of 40 cents, or 0.5%, settling at $77.36 per barrel.

The previous three sessions had seen WTI decline by 7%, while Brent experienced a nearly 5% drop.

Recent data from the American Petroleum Institute (API) revealed that U.S. crude oil, gasoline, and distillate inventories fell for the fourth consecutive week. This decrease is indicative of sustained demand in the world’s largest oil consumer.

Adding to the market’s bullish sentiment, wildfires in Canada have disrupted production and threatened a significant portion of supply. Analysts from ING noted that these fires have created supply concerns, further supporting oil prices. They observed, “The market is nearing oversold territory, and we continue to believe that the fundamentals favor higher prices through the rest of the third quarter due to a deficit environment.”

According to API figures, crude stocks in the U.S. dropped by 3.9 million barrels for the week ending July 19. Gasoline inventories fell by 2.8 million barrels, while distillates saw a decrease of 1.5 million barrels. This marks the first time since September 2023 that U.S. crude stocks have declined for four consecutive weeks.

The official government data on oil inventories is expected to be released later on Wednesday.

Earlier in the week, oil prices had hit a six-week low, with Brent crude closing at its lowest point since June 9. This decline was influenced by ongoing ceasefire discussions between Israel and Hamas, a plan initially outlined by U.S. President Joe Biden in May and mediated by Egypt and Qatar. Additionally, concerns about an economic slowdown in China, the world’s largest crude importer, further contributed to the weakening of global oil demand.