By Adedapo Adesanya
Oil prices were down on Wednesday after a smaller-than-expected draw in US crude stockpiles and as concerns over Chinese demand persisted, with Brent crude futures losing 90 cents or 1.13 per cent to sell at $78.65 a barrel and the US West Texas Intermediate (WTI) crude futures shedding $1.01 or 1.34 per cent to quote at $74.52 per barrel.
The US Energy Information Administration reported inventories of the commodity had declined in the week to August 23.
Oil inventories shed 800,000 barrels in the reporting period, compared with a draw of 4.6 million barrels for the previous week.
A day before the EIA’s report was out, the American Petroleum Institute (EIA) reported an estimated crude oil inventory draw of 3.4 million barrels for the week to August 23, largely in line with analyst expectations.
Meanwhile, China demand worries also continued to weigh on prices as recent data pointed to a struggling economy and slowing oil demand from refiners.
Market analysts noted that demand in China remains weak and the expected second-half rebound has yet to show credible signs of commencing.
Also, traders were torn between supply worries amid Libya’s production shutdown, and demand suspicions on lower refining margins.
Libya is shutting down its oil fields amid a dispute between rival political factions. The fields being shut down are all in the east of the country, which is under the control of a government that is not internationally recognized and could see about 1.2 million barrels per day in production shut down.
Analysts warned that the Libyan disruptions could tighten the oil market, considering real barrels are removed, but investors may want to see a drop in Libyan crude exports first before moving ahead.
The geopolitical premium to oil prices remains in place as well as Israel continues to bomb Gaza and ceasefire talks stall, while Israel turns its missiles to Lebanon to pre-empt an attack threatened by Hezbollah.
Over the weekend, Israel and Hezbollah bombarded each other with rockets and missiles across the Lebanese border. This heightened worries that geopolitical risks will continue to put world crude oil prices on edge.