Oil Edges Higher on U.S. Inventory Fall
Oil prices edged higher on Thursday, buoyed by a bigger-than-expected fall in U.S. inventories, but fears that rising interest rates could dent global economic growth limited gains.
Brent crude futures rose 45 cents, or 0.6%, to $74.52 a barrel by 1106 a.m. ET (1503 GMT). U.S. West Texas Intermediate (WTI) crude futures rose 55 cents, or 0.8%, to $70.11 a barrel.
Both benchmarks gained about 3% on Wednesday after the U.S. Energy Information Administration (EIA) said crude inventories dropped by 9.6 million barrels in the week ended June 23, far exceeding the 1.8-million barrel draw analysts had forecast in a Reuters poll.
“The jury is still out on whether the second part of 2023 will bring with it the long-anticipated decline in inventories. Nonetheless, the impact that stocks have on oil prices was on display yesterday on a smaller scale,” PVM Oil analyst Tamas Varga said.
Concerns about the impact that rising interest rates will have on economic growth came back to the fore, however, capping gains.
“Crude traders remain torn between rising interest rates with fears of a global recession against elevated travel demand and shrinking crude supplies,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Leaders of the world’s top central banks reaffirmed on Wednesday they think further policy tightening will be needed to tame inflation, but still believe they can achieve that without triggering outright recessions.
With U.S. inflation well above the Federal Reserve’s 2% goal and a labor market that’s still tight, most of the central bank’s policymakers expect they will need to raise interest rates at least twice more by year’s end, Fed Chair Jerome Powell said.
European Central Bank President Christine Lagarde has also cemented expectations for a ninth consecutive rise in euro zone rates in July.
Adding to pressure, annual profits at industrial firms in China, the world’s second-biggest oil consumer, extended a double-digit decline in the first five months as softening demand squeezed margins.
“The lack of prospects for fuel demand growth has limited the gain in oil prices, even with supply curbs by oil producers,” said Tetsu Emori, CEO of Emori Fund Management Inc.
Given falling prices, Saudi Arabia this month pledged to sharply cut its output in July, adding to a broader OPEC+ deal to limit supply into 2024.
