Investing.com — Oil prices settled higher on Wednesday, recovering from a recent swing as traders weighed a bigger-than-expected dip in inventories against a softer outlook for global demand.
At 2:30 PM ET (18:30 GMT), oil inventories rose 0.9% to $81.71 versus US oil inventories shown falling 3.7 million barrels in the week ended July 19, compared with expectations for a decrease of 2.6 million barrels.
Gasoline inventories fell by 5.6 million barrels, while distillate inventories, including diesel and , fell by 2.8 million, compared with expectations for a decline of 400,000 barrels and production of 250,000 barrels, respectively.
The increased supply of products comes as refinery activity fell to 91.6% of capacity, compared to 93.7% in the previous week.
Canadian forest fires threaten supply
The wildfires in Canada also contributed to the tone, forcing some producers to limit production and threatening large supplies.
Bloomberg reported that 388,000 barrels of oil per day are produced within 10 kilometers of fires that are at least 10 hectares in size.
The oil outlook is bleak due to fears of supply gluts
Oil prices have suffered steep losses in recent sessions as the outlook for crude deteriorated, especially in light of a forecast surplus in 2025. Concerns about top importer China and talk of a ceasefire between Israel and Hamas also weighed in the crude oil markets.
But the tightness in oil markets is expected to ease in the coming months, with Morgan Stanley forecasting an oil surplus in early 2025. The investment bank also expects crude oil prices to rise toward the high $70s next year.
Increased global oil production, coupled with the prospect of weaker demand from top importer China, is expected to keep oil markets well supplied in the coming months.
China has been a major sore point for crude oil markets amid growing uncertainty about an economic recovery in the country. Recent data shows the country’s economy grew less than expected in the second quarter, while oil imports fell sharply in June.
The Chinese Communist Party’s third plenum provided few clues about Beijing’s plans for more stimulus.
Sentiment towards China was also tense due to uncertainty over how a possible change in the US administration will affect Washington’s attitude towards the country.
(Peter Nurse, Ambar Warrick contributed to this article.)
