Oil prices climbed in Asian trade on Wednesday, finding a brief reprieve from recent losses. This upward tick was driven by a surprise decrease in US crude inventories, as reported by the American Petroleum Institute (API). The API data showed a drawdown of 3.9 million barrels for the week ending July 19, defying expectations of a build. This marks the fourth consecutive week of inventory declines, suggesting robust US oil demand during the peak summer travel season.
However, despite this positive sign, the overall outlook for oil prices remains clouded by long-term concerns about market supply and demand. Morgan Stanley, for example, forecasts an oil surplus by early 2025, predicting crude prices to trend around the high $70s by next year. Increased global oil production, coupled with expectations for weaker demand from China, the world’s largest oil importer, is fueling this bearish sentiment.
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Concerns about China’s economic recovery continue to weigh on the market. The country’s second-quarter growth came in below expectations, and oil imports dropped sharply in June. Uncertainty surrounding China’s economic outlook and the impact of potential changes in US policy toward China are adding to market anxieties.
The official inventory data from the Energy Information Administration is due later on Wednesday. This release will provide further insight into the direction of the market and help clarify the short-term trajectory of oil prices.