Oil Up 2% on U.S. Crude Stock Drop, Russian Refinery Attacks

OIL PRICE - LONDON. Oil prices rose 2% on Wednesday, supported by a drop in U.S. crude inventories as well as potential supply disruption after Ukrainian attacks on Russian refineries and signs of strong demand.

Brent crude futures for May were up $1.54, or 1.88%, to $83.46 a barrel by 1445 GMT. U.S. West Texas Intermediate crude for April gained $1.59, or 2.05%, to $79.15.

U.S. crude stockpiles fell by 1.5 million barrels to 446.99 million barrels in the week to March 8 according to data from the Energy Information Administration (EIA), falling below forecasts of a 1.3 million barrel drop.

U.S. crude processing rose by 1.9 percentage point to 86.8% utilisation according to the EIA, as refinery capacity returns from maintenance.

Brent remains range-bound despite Wednesday's rally. The front-month contract has settled in a narrow range between $81.50-$84 a barrel for more than a month.

"While the geopolitical temperature has moved higher by a few degrees since December we have yet to experience any disruptions, and the market has concluded that such a risk is currently very low," Saxo Bank analyst Ole Hansen said of the narrow trading range.

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Ukraine launched a drone attack on Russian regions on Wednesday, causing a fire at Rosneft's biggest oil refinery in what President Vladimir Putin said was an attempt to disrupt Russia's presidential election.

"The sudden but understandable brightening of (oil price) sentiment has been triggered by the continuous strikes on Russian refiners," said Tamas Varga of oil broker PVM.

Oil and the wider financial markets also found support from sentiment that the latest U.S. inflation will not derail interest rate cuts by mid-year. Lower rates support oil demand.

"Crude trades higher today after yesterday’s hotter-than-expected U.S. inflation print did little to alter the market's view on the timing and subsequent depth of incoming growth-supportive U.S. rate cuts," Hansen added.

In an earlier sign of strong demand, the Organization of the Petroleum Exporting Countries on Tuesday stuck to its forecast for oil demand growth of 2.25 million barrels per day (bpd) in 2024, higher than many other forecasts.

The International Energy Agency, which expects demand growth to be much lower, updates its forecasts on Thursday.