By Scott DiSavino
NEW YORK (Reuters) – Oil prices edged up about 1% on Wednesday on a bigger-than-expected storage withdrawal, a slump in U.S. crude output, Chinese economic stimulus, geopolitical tensions and a weaker dollar.
futures rose 49 cents, or 0.6%, to settle at $80.04 a barrel, while U.S. West Texas Intermediate crude (WTI) ended 72 cents, or 1.0%, at $75.09.
China’s central bank will cut the amount of cash that banks must hold as reserves from Feb. 5, a move expected to shore up a fragile economic recovery.
U.S. crude stockpiles tumbled by 9.2 million barrels last week, the Energy Information Administration said, more than quadruple the 2.2 million-barrel draw analysts forecast in a Reuters poll. [EIA/S] [EIA/A]
“It’s a weather report all-around … Nobody was driving (last week). One big number is domestic production was down, and Bakken production took a big hit,” said Bob Yawger, director of energy futures at Mizuho, a bank.
U.S. crude output fell from a record-tying 13.3 million barrels per day (bpd) two weeks ago to a five-month low of 12.3 bpd last week after oil wells froze during an Arctic freeze.
North Dakota officials have said it could take a month for oil output in the state, which includes the Bakken shale field and is the third biggest oil producing state, to recover after last week’s extreme weather cut production by more than half.
Geopolitical tensions remained in focus the day after a coalition of 24 nations led by the U.S. and Britain conducted new strikes against Houthi fighters in Yemen who have been attacking global trade.
The U.S. said Iran-backed Houthis have mounted 26 attacks since late November on commercial shipping in the Red Sea which was used by about 12% of global oil trade before the attacks.
The U.S. also carried out strikes against Iran-linked militia in Iraq on Tuesday, after an attack on an Iraqi air base wounded U.S. forces.
“Geopolitical risk and the threat of delays and disruption are causing some alarm but that’s not being particularly reflected in the price at this stage,” said Craig Erlam, senior market analyst UK & EMEA, at data and analytics firm OANDA.
Elsewhere, tank shells hit a U.N. training centre sheltering tens of thousands of displaced people in the southern Gaza city of Khan Younis, killing at least nine people and wounding 75, as Israeli forces advanced there.
The U.S. dollar, meanwhile, fell to a one-week low against a basket of other currencies. Analysts at energy advisory Ritterbusch and Associates said the weaker dollar was lending some “bullish momentum” to oil prices.
A weaker dollar makes crude cheaper for buyers using other currencies.
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