Oil Prices Steady as China Boost Fades; US Inventories Expected to Decline

Oil prices experienced a slight decline during Asian trading on Wednesday, following a surge in the previous session fueled by optimism regarding additional stimulus measures in China.

Market reaction remained tepid despite industry reports indicating that U.S. oil inventories decreased more than anticipated in the past week. Nonetheless, prices have benefitted from a robust two-week rally, recovering from near three-year lows reached earlier in September. Contributing factors include supply disruptions in the U.S. and increasing tensions in the Middle East.

Brent oil futures for November delivery dropped 0.1% to $75.12 per barrel, while West Texas Intermediate crude futures also fell by 0.1%, trading at $71.46 per barrel.

### Stimulus in China and Future Expectations

On Tuesday, the People’s Bank of China introduced a series of stimulus initiatives, including enhanced liquidity measures and relaxed property market restrictions. This announcement sparked optimism for potential improvements in economic growth within the world’s largest oil importer, leading to a 1.7% increase in oil prices during the session.

However, analysts emphasize that further actions from Beijing are necessary to address the ongoing sluggish growth. China has implemented various monetary stimulus measures over the past three years, often with limited impact. Analysts at ANZ stated, “Yesterday’s monetary stimulus package is far from being sufficient on its own. In our view, an aggressive fiscal policy is required.”

### U.S. Inventory Trends

According to data from the American Petroleum Institute, U.S. oil inventories fell by 4.339 million barrels in the week ending September 20, significantly surpassing expectations for a decrease of 1.1 million barrels. Historically, API data tends to correlate with official inventory readings that are set to be released later.

U.S. inventory levels are expected to remain tight, as supply disruptions caused by storms in the Gulf of Mexico counterbalance the decline in fuel demand following the peak summer travel season. Hurricane Helene is predicted to approach the Gulf in the coming days, marking the second significant storm to impact the region within a month.