Oil edges up on Thursday morning, following a sharp drop on Wednesday as the US government’s credit downgrade affected market sentiment. At the same time, prices are supported by concerns over limited oil supply.

A barrel of the European reference crude, Brent, costs USD 83.28 on Thursday morning, compared to USD 83.22 on Wednesday afternoon. Meanwhile, US benchmark West Texas Intermediate (WTI) oil trades at USD 79.55, slightly up from USD 79.52.

Despite a broader bearish market sentiment with many investors holding a negative view on the market development, oil is supported by concerns about tightening supply, partly due to expectations that production cuts will continue when the Organization of the Petroleum Exporting Countries and their allies’ committee JMMC meets on Friday, August 4.

The supply situation is highlighted by a record drop in US oil inventories. US crude oil inventories fell by 17 million barrels in the past week, according to a report from the US Department of Energy on Wednesday. According to a poll conducted by Reuters, analysts only expected a drop of around 1.4 million barrels, according to Reuters news agency.

The drop in US oil inventories indicates that global demand is outstripping supply, while production cuts by major producers continue.

At the same time, the Chinese government’s measures to boost the country’s economy are also helping to support oil prices and oil demand.

In the rest of the commodity market, a troy ounce of gold costs USD 1937.67 on Thursday morning, compared to USD 1935.48 on Wednesday afternoon.

(Translated using DeepL with additional editing by Simon Øst Vejbæk)