Oil prices jump 2% on supply worries after large US stock drawdown

Brent crude oil price news: Oil prices gained nearly $2 in early trade on Wednesday after industry data showed a bigger-than-expected draw in US crude stocks amid worries about supply disruptions from the Middle East due to a deepening Israel-Hamas conflict. Brent crude futures jumped $1.62, or 1.8 per cent, to $91.49 a barrel at 0148, with markets also braced for Chinese GDP numbers. West Texas Intermediate crude (WTI) futures were up $1.77, or 2 per cent, at $88.43 a barrel.

US crude stocks fell by about 4.4 million barrels in the week ended Oct. 13, according to market sources citing American Petroleum Institute figures on Tuesday. That was much steeper than a 300,000 barrel draw that analysts had forecast. Official US government data is due later on Wednesday. Tension in the Middle East escalated after about 500 Palestinians were killed in a blast at a Gaza City hospital on Tuesday that Israeli and Palestinian officials blamed on each other.

US President Joe Biden is set to visit Israel on Wednesday to show support for the country in its war with Palestinian Islamic Jihad militant group Hamas. The White House said he will make clear he does not want the conflict to expand. On the demand side, China's economy likely slowed in the third quarter, data is expected to show on Wednesday, weighed by persistently weak demand, although increased stimulus has improved the prospects Beijing might be able to hit its full-year growth target.

Meanwhile, US retail sales increased more than expected in September, spurring expectations of another interest rate hike by the Federal Reserve by year-end. Interest rate hikes to curb inflation can slow economic growth and reduce oil demand. Venezuela's government and its political opposition on Tuesday agreed to electoral guarantees for 2024 presidential elections, paving the way for possible US sanctions relief that could boost oil supplies.

The US has imposed sanctions on oil exports from Venezuela since 2019 and while sanctions relief is expected to boost oil supply oil flow, analysts expect any increases from the country to take time due to a lack of investment.