By Ambar Warrick
Investing.com -- Oil prices crept higher on Wednesday as data signaled a bigger-than-expected weekly draw in U.S. inventories, although concerns over adverse weather conditions weighed on the outlook for near-term demand.
Data from the American Petroleum Institute showed that U.S. inventories fell by a bigger than expected 3 million barrels in the week to December 16, heralding a similar trend in official data that is expected to show a 1.7 million barrel drop in inventories later in the day. The drop in inventories comes amid supply disruptions caused by the temporary closure of the Keystone pipeline.
London-traded Brent oil futures rose 0.4% to $80.10 a barrel, extending gains into a third straight session, while West Texas Intermediate crude futures rose 0.1% to $76.32 a barrel by 20:43 ET (01:43 GMT).
Crude prices benefited from a weakening dollar this week, especially after the Bank of Japan tweaked its ultra-dovish policy for the first time in nearly a decade. The move propped up the yen and pushed the dollar close to a six-month low, which is beneficial for commodities priced in the greenback.
Prices were also helped by a commitment by the U.S. government to begin refiling its Strategic Petroleum Reserve from February, which sent a buy signal to markets.
But on the other hand, a worsening outlook for a storm in the midwestern United States pointed to potential travel disruptions during the year-end holiday season, which could further dent demand for fuel. U.S. supplies are also set to increase with the full restart of the Keystone pipeline on the horizon.
Growing gasoline inventories also showed that fuel demand still remained weak in the world’s largest oil consumer.
While oil prices rose in recent sessions, they are still nursing sharp losses this year as rising interest rates and high inflation fed into concerns over a potential recession in 2023.
Even as the BOJ’s policy shift dented the dollar, it indicates that almost all major central banks in developed markets are gearing up to tighten policy in 2023, which could further dent crude demand.
Hawkish signals from the Federal Reserve, European Central Bank, and the Bank of England had rattled crude markets last week. Uncertainty over China's economic reopening, as the country grapples with rising COVID-19 cases, is also expected to weigh on crude in the near-term.