WTI Crude Oil Supported by Drawdown in US Crude Stocks, PBOC’s Latest Move

Early on Thursday, WTI crude oil is trading in the green as traders remain upbeat due to a decrease in US stockpiles

Arslan Butt•Thursday, January 25, 2024•2 min read

Early on Thursday, WTI crude oil is trading in the green as traders remain upbeat due to a decrease in US stockpiles over the previous week. At the time of writing, US crude oil is trading at $X per barrel. According to the latest EIA report, crude stockpiles in the US contracted by 9.2 million barrels over the previous week.

This news had a strong impact on oil prices, sending them higher, as it came in better than expected.

Analysts had forecast a smaller drawdown of 2.2 million barrels for the period instead. In addition to the decline in US crude stocks, the supply side also experienced some tightness owing to the cold winters shutting down refineries stateside last week. US’s total crude output dropped to 12.3 million barrels per day, the lowest levels seen in five months.

North Dakota alone saw oil production fall by as much as 50% to around 600,000–650,000 barrels per day due to cold weather conditions. The popular commodity is also enjoying support from rising optimism in global financial markets following the PBOC’s decision to cut banks’ reserve ratios.

This move increases the likelihood of China’s central bank stepping in to support economic recovery and offers hopes for more stimulus measures to revive one of the largest economies worldwide.

The People’s Bank of China (PBOC) decided to slash its bank reserves on Wednesday by 50 bp, a move that could inject around $140 billion of cash into China’s banking system. Amid the decline in China’s stock markets, this move could help global oil traders feel more optimistic about China’s economic recovery.

As one of the largest crude oil consumers worldwide, oil prices are especially sensitive to the economic situation in China. However, global macroeconomic tensions continue to weigh on traders’ sentiments for now.

The US military continues to carry out strikes against Yemeni Houthis in the Red Sea region, further igniting worries about global oil supply and supporting WTI crude oil prices in the market.

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.