Oil Prices Rise as U.S. Stocks Decline and Red Sea Tensions Increase

Oil prices rose by more than 1% early on Thursday, buoyed by a larger-than-expected U.S. crude draw, Chinese stimulus, and continued attacks by the Houthis in and near the Red Sea.

As of 10:50 a.m. ET on Thursday, the U.S. benchmark, WTI Crude, had risen by 1.53% to $76.00. The international benchmark, Brent Crude, was up by 1.36% at $80.95.

Oil prices were supported early on Thursday by the Energy Information Administration’s inventory report from Wednesday, which showed a crude draw of 9.2 million barrels for the week to January 19.

“The withdrawals are significantly higher than the 6.7MMbbls of withdrawal that API reported or the market expectations of around 0.9MMbbls/d of withdrawal,” ING strategists Warren Patterson and Ewa Manthey wrote in a note on Thursday.

“Crude oil imports into the country dropped by around 1.8MMbbls/d over the week, which helped to tighten the supplies,” they said.

Analysts at Saxo Bank warned that “the EIA report could have been distorted by the recent cold ‘bomb’ in the US temporarily cut production of oil and gas due to freeze-offs – when low temperatures freeze wells and other equipment, while temporarily driving a spike in demand for fuels, especially diesel and heating oil.”

The two other bullish factors pushing oil prices higher on Thursday were the latest Chinese stimulus unveiled on Wednesday and the incessant Houthi attacks in the Gulf of Aden in the Middle East.

The Iran-backed Houthi militants in Yemen claimed on Thursday they hit a U.S. warship in the Gulf of Aden and the Bab el-Mandeb Strait, while the U.S. said the Houthis targeted – again – a U.S. commercial shipping vessel-the U.S.-flagged, owned, and operated container ship M/V Maersk Detroit, which was transiting the Gulf of Aden.

China on Wednesday said it would cut the bank reserve ratio—a move aimed at injecting cash into the banking system to boost growth, and consequently—oil demand.

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