By Scott DiSavino
NEW YORK (Reuters) -Oil prices edged up about 1% on Wednesday from a five-month low in the prior session on a much bigger-than-expected weekly withdrawal from U.S. crude storage and as an attack on a tanker in the Red Sea threatens Middle East oil supplies.
Brent futures rose 80 cents, or 1.1%, to $74.04 a barrel by 1:14 p.m. EST (1814 GMT), while U.S. West Texas Intermediate (WTI) crude rose 67 cents, or 1.0%, to $69.28.
A tanker in the Red Sea off Yemen’s coast was fired on by gunmen in a speedboat and targeted with missiles, the latest incident to threaten the shipping lane after Yemeni Houthi forces warned ships not to travel to Israel.
The U.S. Energy Information Administration (EIA) said energy firms pulled a bigger than expected 4.3 million barrels of crude from stockpiles during the week ended Dec. 8 as imports fell. [EIA/S] [EIA/A]
That compares with a 0.7-million barrel withdrawal forecast by analysts in a Reuters poll, a 2.3-million barrel decrease in the American Petroleum Institute (API) trade group’s report, a 10.2-million barrel increase during the same week last year and a five-year (2018-2022) average increase of 0.4 million barrels for this time of year.
“This (EIA) report is definitely more supportive than the (API) report that we saw yesterday,” said Phil Flynn, an analyst at Price Futures Group, referring to the “larger than expected drawdown in crude oil supplies” in the EIA report.
Both Brent and WTI futures fell to their lowest since June on Tuesday and were in contango through at least June.
Analysts said that contango – with prices in later months higher than earlier months – was bearish because it can encourage marketers to buy oil at current prices and store it for sale in later months when prices are higher.
INTEREST RATE WATCH
Later Wednesday, investors will be looking for the U.S. Federal Reserve’s latest policy decision.
After boosting interest rates to tackle soaring inflation several times since March 2022, the Fed is widely expected to leave interest rates unchanged for a third straight time.
Analysts also expect the Fed to signal that a pivot to monetary policy easing will neither come soon nor be sharp, even as inflation heads toward the U.S. central bank’s 2% goal.
Higher interest rates boost borrowing costs for consumers, which can slow economic growth and demand for oil.
U.S. Treasury Secretary Janet Yellen said she saw a consistent pattern of inflation falling over time.
Elsewhere, nearly 200 nations reached an historic deal at the COP28 conference to begin reducing the global consumption of fossil fuels, meant to send a signal to investors in oil and other fossil fuels.
Saudi Arabia’s energy minister said he was in agreement with the COP28 presidency on the final deal, adding that it would not affect the kingdom’s hydrocarbon exports.
In its monthly report, the Organization of the Petroleum Exporting Countries (OPEC) blamed the latest crude price slide on “exaggerated concerns” about oil demand growth.
(Reporting by Scott DiSavino in New York, Robert Harvey in London and Colleen Howe in Beijing; Editing by Elaine Hardcastle and Cynthia Osterman)
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