Oil prices surge as US crude stockpiles plummet beyond forecasts

WEB DESK: Oil prices experienced a surge on Thursday following the release of data revealing a more substantial-than-anticipated decline in US crude stockpiles last week.

Simultaneously, a fresh assault by Houthi forces on ships off the coast of Yemen underscored the threats faced by global trade on a critical transit route.

Brent crude futures showed a remarkable increase of $1.29, or 1.6 per cent, reaching $81.33 a barrel at 1521 GMT. In a parallel move, US West Texas Intermediate crude marked a gain of $1.37, or 1.8 per cent, reaching $76.46 a barrel.

According to the Energy Information Administration, US crude stockpiles plummeted by an astonishing 9.2 million barrels in the past week, far surpassing the 2.2 million-barrel draw predicted by analysts in a Reuters poll.

This dramatic decline was primarily attributed to a sharp reduction in US crude imports due to adverse winter weather conditions that led to refinery closures and decreased road traffic.

The persisting geopolitical tensions in the Middle East remained a focal point of concern. In the latest development, Maersk reported that explosions near the Bab al-Mandab Strait off Yemen forced two ships operated by its US subsidiary, carrying US military supplies, to turn around under the protection of the US Navy.

Yemen’s Houthi leader, on Thursday, pledged to continue targeting ships linked to Israel until aid reaches the Palestinian people in Gaza, further heightening uncertainties in the region. Joshua Mahony, Chief Market Analyst at Scope Markets, commented, “We are finally seeing energy markets wake up to the distinct possibility that these supply chain disruptions will rumble on for months yet. The prospect of a military solution to ensure safe passage looks unlikely.”

Oil prices also found support in expectations of China’s economic recovery. The People’s Bank of China announced a significant cut in bank reserves, injecting approximately $140 billion into the banking system, signalling strong support for its fragile economy and declining stock markets.

However, concerns over sustained high interest rates lingered. Thursday’s data revealed that the US economy grew at a faster pace than anticipated in the fourth quarter, indicating that the Federal Reserve might not be in a hurry to cut interest rates.

In parallel, the European Central Bank retained its record-high benchmark rate of 4 per cent, providing no indication that policymakers are contemplating any policy easing at this time.

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