Oil prices ended higher after WTI bounced off $76, up to $78, reversing the prior day's losses from concerns about China's economy as Middle East tensions were top of mind for the day.
"The spreading conflict in the Middle East remains the most visible and growing risk for energy markets," analysts at J.P. Morgan wrote in note dated Tuesday.
"While escalation cannot be written off, it remains unlikely in our view, as main parties in the conflict have strong incentives to avoid direct confrontation, and so far they have acted accordingly," they said.
Meanwhile, "drone attacks on refiners in Russia pose a new, less appreciated, but potentially more damaging threat to global oil product balances," said analysts at J.P. Morgan.
"Since the start of the year, there have been five recorded Ukraine-linked drone attacks on Russian energy infrastructure."
But for now, the next leg will be driven by any hints at further crude draws from API's report.
API
Crude -2.5mm (-800k exp)
Cushing -2.0mm
Gasoline +600k (+1.4mm exp)
Distillates -2.1mm (-800k exp)
Stocks at the crucial Cushing hub fell for the 4th week in a row (for the worst January levels in 12 years). Crude inventories drew down for the 3rd week in a row...
Source: Bloomberg
WTI was trading just below $78 ahead of the API print and was steady after the data...
"In energy, crude oil remains upbeat after last week's positive price breakout above the $75 [a barrel] and the rising tensions in the Red Sea region as everyone is now expecting the U.S. response to the latest attacks," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a Tuesday note.
Finally, of note today was reports that in Saudi Arabia, state producer Saudi Aramco on Tuesday said it won't try to boost its maximum daily oil production to 13 million barrels a day after receiving an order from the country's energy ministry.
On its face, the decision may give Saudi Arabia "a bit more freedom to maintain a restrictive output policy" beyond the first quarter of this year, said analysts at Macquarie in a Tuesday note.
