The US Energy Information Administration (EIA) reported a 7.2 million barrel decline in commercial crude oil inventories for the week ending last Friday. The figure came in well above the consensus forecast of a 2.5 million barrel draw, signalling tighter supply in the world's largest oil consumer.
Brent crude, the international benchmark, rose by more than 1.5% on the news to trade above $85 a barrel, while West Texas Intermediate (WTI) climbed to around $81. The move extended a recent rally driven by Opec+ production cuts and rising geopolitical tensions in the Middle East.
For UK investors, the development is a mixed bag. The FTSE 100, which is heavily weighted towards oil majors such as Shell and BP, saw its energy sector gain ground on Thursday. Shell shares rose 0.9%, while BP added 1.1%, helping to support the index amid broader market caution. However, persistently higher crude prices also raise the risk of sticky inflation, which could delay interest rate cuts by the Bank of England.
Analysts at ING noted that the inventory draw was 'largely driven by a sharp increase in refinery runs and strong export demand'. They added that while the headline figure is supportive for prices, the market remains 'vulnerable to demand-side weakness' if global economic growth falters.
For UK households, the knock-on effect could be felt at the pump. Petrol prices have already edged higher in recent weeks, and further crude price strength may push the average cost of a litre of unleaded above 150p. Businesses reliant on transport and logistics are also likely to face higher input costs, which could feed through to consumer prices.
Source: Energy Information Administration (EIA) Weekly Petroleum Status Report