Oil Prices Climb on Strong U.S. Demand and Inventory Drawdowns

Oil prices continued their upward momentum into a second consecutive session on Thursday, driven by strong demand in the U.S. and a significant drawdown in crude inventories, which reinforced confidence in consumption trends [1]. The U.S. Energy Information Administration reported a 6 million barrel decline in crude stocks last week—the largest since mid-June—while gasoline stockpiles also fell for the fifth straight week [4]. These developments supported a firming trend in both Brent and West Texas Intermediate (WTI) crude prices, with Brent trading above $67 per barrel and maintaining a 1.6% gain from the previous day [5].

The broader energy market remained underpinned by seasonal demand in the northern hemisphere, with market participants watching for signs of a potential shift in global oil balances. While some analysts have forecast a global surplus later in the year, the current low inventory levels and robust consumption in key markets are delaying that outlook [4]. However, concerns remain over U.S. trade policies that could affect global growth, as well as the potential for OPEC+ to increase production, which could eventually tip the balance toward oversupply [5].

Equity markets across Asia showed a mixed performance amid these developments. In Tokyo, the Nikkei 225 fell 0.6% following a private survey showing factory activity remained below break-even levels for a second consecutive month in August [1]. Hong Kong's Hang Seng index also edged down 0.2%, while China's Shanghai Composite inched up 0.1% [1]. Australia stood out as a bright spot, with the S&P/ASX 200 rising 1.1% to cross the 9,000 threshold, boosted by favorable economic readings and strong corporate results [1]. The South Korean Kospi gained 0.4% after trimming earlier gains [1].

The uncertainty in equity markets was partly attributed to anticipation of key U.S. Federal Reserve comments and ongoing diplomatic developments, including potential shifts in sanctions policy that could affect major oil producers [2]. Energy-related stocks, however, fared better, with shares of firms like Beach Energy and Santos seeing gains amid the positive oil price environment [2]. The Bank of Indonesia’s recent rate cut also introduced additional economic variables influencing regional market sentiment [8].

Despite the recent strength, oil prices remain down over 10% from the start of the year, as traders remain cautious about the long-term outlook. Efforts toward a potential ceasefire in Ukraine are also being closely watched, as they could ease restrictions on Russian oil shipments and alter the global supply landscape [5]. Meanwhile, the U.S. crude storage hub in Oklahoma reported a seventh consecutive week of inventory gains, according to EIA data, introducing a note of caution into the bullish sentiment [5].

As markets await further guidance from central banks and governments, energy markets continue to benefit from tight supply conditions and strong demand indicators, contrasting with the uneven performance seen in equities [7]. The divergence in asset class performance highlights the complex interplay of macroeconomic, geopolitical, and seasonal factors shaping global financial markets.