Oil prices rise on drop in supply

Oil prices continued their rally into Wednesday morning in Asia after the American Petroleum Institute (API) reported a drop in the US crude oil supply.

International Brent Oil Futures rose 3.46% to $28.09 by 10:12 PM ET (02:12 AM GMT) and US Crude Oil WTI Futures jumped 3.92% to $24.95.

API estimated a surprise draw of 1.247 million barrels in the US crude oil inventory for the week ending March 21, with a build of 2.774 million barrels.

This is a much bigger decrease than last week’s 421,000 barrels.

Oil prices also got a boost from U.S. moves to halt the economic impact of the COVID-19 pandemic. Following the United States Federal Reserve’s announcement of unprecedented measures to boost the economy on Monday, the US Senate looked close to reaching an agreement on a massive stimulus package on Tuesday. The talks will continue Wednesday.

But some analysts struck a note of caution, as demand continues to decrease with more countries imposing lockdowns to curb the spread of COVID-19 while Saudi Arabia and Russia are also no closer to ending their price war.

“Oil is clawing its way higher, mainly on the back of the weaker dollar that stemmed from the Fed’s unprecedented measures,” Edward Moya, senior market analyst at broker OANDA, told CNBC.

“WTI crude volatility will remain high and traders should not be surprised if this rally eventually gets faded.”