Oil markets advanced in Asian trade on Wednesday, building on gains from the previous session as severe winter weather in the United States curtailed production and pressured exports, underpinning expectations of tighter supplies in the near term. A sliding U.S. dollar added support to crude, even as traders monitored geopolitical remarks about additional U.S. forces headed to the Middle East and awaited guidance from the Federal Reserve.
Prices and trading
Brent futures for March gained 0.1% to $67.66 a barrel - a level described as a near four-month high - while West Texas Intermediate front-month futures rose 0.2% to $62.53 a barrel by 20:49 ET (01:49 GMT).
Weather-driven supply tightness
Market participants attributed much of this week's price appreciation to a severe winter storm that swept across broad sections of the United States and disrupted crude production in several regions. The storm brought heavy snowfall and subzero temperatures to large swathes of the country, creating operational challenges.
Export activity from the U.S. Gulf Coast was hit particularly hard, with flows reported to have fallen to zero as the weather forced shutdowns. Reuters estimates indicated roughly 2 million barrels per day were affected over the weekend, a scale of disruption that prompted traders to reposition for notable drawdowns in U.S. oil inventories in coming weeks.
Inventory data and expectations
Wednesday evening attention focused on industry inventory signals following a surprise draw reported by the American Petroleum Institute. API data released on Tuesday evening showed U.S. oil inventories unexpectedly declined by about 0.25 million barrels last week, contrasting with market expectations for a build of 1.45 million barrels. The API figure is typically followed by an official government inventory release, which was due later on Wednesday.
Currency moves and central bank watching
Oil prices received further support from a weaker dollar, which fell to a near four-year low on Tuesday. A softer greenback tends to make dollar-priced commodities more attractive to holders of other currencies, broadening demand. The dollar's slide occurred amid investor unease over U.S. economic uncertainty, the upcoming Federal Reserve interest rate decision, and the administration's intermittent trade and geopolitical policy actions.
The Federal Reserve was widely expected to keep interest rates unchanged at the end of a meeting later in the day, with market attention centered on any signals from Chair Jerome Powell about the likely path of policy through the year.
Geopolitical backdrop
Beyond weather and macro considerations, market attention was drawn to remarks by U.S. President Donald Trump indicating a second armada was being sent to the Middle East. Traders continued to weigh the potential for heightened tensions in the region when assessing risk premia in crude prices.
Overall, the combination of weather-related supply disruptions in the United States, a softer dollar, and geopolitical developments contributed to the upward pressure on crude during early Asian trading on Wednesday.