NEW YORK: Oil prices rallied more than 2% on Wednesday, resuming its upward path as investors weighed conflicting statements on the possible withdrawal of some Russian troops from around Ukraine.
Russia’s threatening posture has dominated oil markets for several weeks, with concerns that supply disruptions from the major producer in a tight global market could push oil prices to $100-a-barrel.
“The market remains extremely tight and prices had been on an upward trajectory prior to the escalation. The softening of tensions may have only delayed the march to $100,” said Craig Erlam, senior market analyst at OANDA.
The market was also supported by weekly data showed U.S. fuel demand holding at record highs, while crude inventories at the Cushing, Oklahoma, storage hub and delivery point for U.S. futures dropped to their lowest since September 2018.
Brent crude was up $2.19, or 2.3%, to $95.47 a barrel at 12:55 p.m. EST (1755 GMT), reversing most of the 3.3% drop on Tuesday.
U.S. West Texas Intermediate (WTI) crude was up $2.21, or 2.4%, at $94.29 after the contract ended Tuesday’s session with a 3.6% decline.
On Monday, both benchmarks hit their highest since September 2014, with Brent touching $96.78 and WTI reaching $95.82.
Moscow announced a partial pullback of troops from Ukraine’s borders but NATO Secretary-General Jens Stoltenberg said on Wednesday the alliance had seen no de-escalation and Russia was continuing its military build-up.
“The risk of a full scale invasion has receded a bit. But we are unlikely to move out of the current status quo,” said Bjarne Schieldrop, chief commodities analyst at SEB in Oslo.
U.S. crude inventories rose by 1.1 million barrels last week, but overall inventories at the Cushing hub dropped by 1.9 million barrels, and product supplied - a proxy for demand - hit a record 22.1 million barrels per day over the past four weeks, the Energy Information Administration said.
“The EIA inventories reflected the power outages we saw in Texas that impacted more than 1 million bpd of capacity last weekend,” said Andy Lipow, president of Lipow Oil Associates. “The situation in Ukraine is overwhelming the EIA data.”