After two days of losses triggered by fears of a banking sector meltdown after the collapse of Silicon Valley Bank, oil prices rebounded early on Wednesday, pushed higher by increased Chinese refinery activity, estimated drawdowns in U.S. product inventories, and bargain-hunting from investors.
Oil prices hit a three-month low on Tuesday, as concerns over the U.S. banking system and the increasingly confusing picture for the Fed’s next interest rate policy meeting dragged the markets down early this week.
The U.S. equity markets rebounded on Tuesday, but oil continued to trade lower.
After a relative calm in the global markets on Tuesday, early on Wednesday oil prices bounced off the three-month lows, with both WTI and Brent rising by more than 1%. WTI Crude bounced back to above $72 per barrel and Brent Crude was trading at around $78 a barrel.
Fears of a banking sector contagion had sent Brent below $80 earlier this week. The international benchmark was still trading below that threshold early on Wednesday, but it ended two days of losses after a rebound in crude oil demand in China pushed crude oil throughputs at refineries higher by 3.3% over the first two months of the year. At an average of 14.36 million barrels per day (bpd), per Reuters, Chinese refinery throughputs in January to February compared with 13.98 million bpd for the first two months of 2022 and 14.1 million bpd for December 2022.
Oil prices were also supported early on Wednesday by data from the American Petroleum Institute (API), which showed a crude inventory build, but larger-than-expected draws in gasoline and distillate inventories.
“Overall the numbers are supportive. The crude build came in slightly lower than expected, whilst the draws in refined products were larger than the market was expecting,” ING strategists Warren Patterson and Ewa Manthey said early on Wednesday.
By Tsvetana Paraskova for Oilprice.com
