WTI remains low near $69.50, decline appears limited on increased US oil demand

• WTI prices could see a rally due to rising demand for the fuel and declining inventories in the United States.
• The change in EIA crude oil inventories fell by 4.471 million barrels in the previous week, compared to a decline of 1.2 million barrels.
• Oil prices face downward pressure amid skepticism about the effectiveness of China’s stimulus measures to sufficiently stimulate its economy.

West Texas Intermediate (WTI) crude oil prices remain subdued, trading near $69.60 a barrel during Asian trading hours on Thursday. However, crude oil prices could rise due to increased demand for the fuel and declining inventories in the United States, the world’s largest oil consumer. The U.S. Energy Information Administration (EIA) reported a sharp drop in U.S. crude oil inventories, with inventories falling by 4.471 million barrels in the week ended Sept. 20, beating expectations for a drop of 1.2 million barrels.

Crude oil prices fell on Wednesday as concerns over potential supply disruptions in Libya eased. Delegates from Libya’s divided east and west have reached an agreement on the process of appointing a central bank governor, a key step towards resolving the ongoing conflict over control of the country’s oil revenues, which has previously disrupted exports, according to Reuters .

Oil prices face challenges as traders reassess the effectiveness of China’s stimulus plans to significantly boost the economy of the world’s biggest oil importer. On Tuesday, People’s Bank of China (PBOC) Governor Pan Gongsheng announced a 50 basis point (bps) cut in the required reserve ratio (RRR). Gongsheng also noted that the central bank will cut the seven-day repo rate from 1.7% to 1.5% and cut the down payment for secondary houses from 25% to 15%. Bloomberg and Reuters reported that China is considering injecting $142 billion more capital into top banks.

The decline in crude oil prices may be limited by escalating tensions in the Middle East. An Israeli airstrike on Beirut killed a senior Hezbollah commander on Tuesday, sparking fears of a wider conflict as cross-border rocket attacks intensified. Meanwhile, the United States, France and several allies have called for an immediate 21-day ceasefire along the Israel-Lebanon “Blue Line” border and expressed support for a ceasefire in Gaza following talks intense Wednesday at the United Nations.