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Oil prices jump on US fuel stocks draw, Middle East tensions

Oil prices

Brent crude futures settled 62 cents higher, or 0.79% at $79.21 a barrel, and U.S. WTI crude jumped 55 cents, or 0.75% to $73.86

Oil prices rose for a third successive day on Wednesday, boosted by a larger-than-expected decline in U.S. fuel stocks, and escalating tensions in the Middle East.

Brent crude futures settled 62 cents higher, or 0.79% at $79.21 a barrel as of 1940 GMT. U.S. West Texas Intermediate (WTI) crude jumped 55 cents, or 0.75% to $73.86.

U.S. gasoline stocks dropped by 3.15 million barrels last week compared with analysts’ projections for a build of 140,000 barrels, per the U.S. Energy Information Administration. Distillate stocks dropped 3.2 million barrels, compared with estimates for a 1 million barrel draw.

Crude stocks, nevertheless, posted a larger-than-expected build of 5.5 million barrels as production recovered after a cold snap, while U.S. refiners stepped up maintenance. Analysts had forecasted a smaller build of 1.9 million barrels.

This is the type of report you would expect out of the post freeze-in with refineries not in any hurry to come back, according to Bob Yawger, director of energy futures at Mizuho Bank.

Refinery utilization dropped 0.5% to 82.4%. On the U.S. Gulf Coast, the deep freeze knocked off 15% of refining capacity, pressuring utilization rates to their lowest level since September 2021, per EIA data.

On the supply side, the Energy Information Administration cut its 2024 outlook for domestic oil output growth on Tuesday, putting it far lower than the 2023 increase and forecasting it would not reach December 2023’s record levels until February 2025.

Meanwhile, the market is keeping an eye on developments in the Middle East.

Traders are also tracking the attacks on shipping in the Red Sea that have disrupted traffic through the Suez Canal, the fastest sea route between Asia and Europe and one that carries around 12% of global trade.

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