Oil Rises on Signs of Strong Demand and Rate Cut Hopes
Oil prices climbed on Wednesday, driven by indications of robust global demand, particularly from major consumer the United States. Additionally, optimism surrounding potential rate cuts by the Federal Reserve further boosted market sentiment, despite lingering concerns about inflation in the U.S.
Evidence of strong demand was reflected in the decline of U.S. crude oil and fuel inventories last week, as reported by market sources citing American Petroleum Institute data ahead of the official U.S. inventory report on Wednesday.
Brent futures for May delivery rose by 83 cents, or 1%, reaching $82.75 per barrel by 0922 GMT, while U.S. West Texas Intermediate crude for April gained 59 cents, or 0.8%, to trade at $78.15.
Tamas Varga, an oil broker at PVM, highlighted factors such as expected global inventory reductions in the second quarter, geopolitical tensions affecting supply, and forthcoming rate cuts that would reduce borrowing costs and bolster oil trading activities.
Although oil prices dipped on Tuesday due to higher-than-expected U.S. crude oil production and bearish economic data, ongoing geopolitical tensions limited the extent of the decline.
The Organization of the Petroleum Exporting Countries (OPEC) maintained its oil demand growth forecast of 2.25 million barrels per day (bpd) for 2024 on Tuesday, indicating continued strong demand. However, the International Energy Agency’s updated forecasts, expected on Thursday, may provide a different perspective on demand growth.
Market sentiment remained positive regarding slightly higher-than-expected U.S. inflation not impeding anticipated interest rate cuts by mid-year, which would support oil demand.
Yeap Jun Rong, a market strategist at IG, noted that despite concerns, the risk environment remained steady, with expectations of a rate cut around June already factored into current market pricing.
The unexpected decrease in U.S. crude inventories and optimistic growth projections by OPEC contributed further to price support, according to Yeap.
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