Oil prices saw a slight increase on Thursday as crude stocks fell due to US refineries increasing processing and a decrease in gasoline inventories, indicating a rise in demand for oil. Brent futures rose by 0.4% to $85.43 a barrel, while U West Texas Intermediate (WTI) crude rose by 0.5% to $82.47 a barrel. US crude inventories dropped by 3.4 million barrels to 445.1 million barrels in the week ending July 5, surpassing analysts’ expectations of a 1.3 million-barrel draw. Gasoline stocks also fell by 2 million barrels to 229.7 million barrels, much more than the anticipated 600,000-barrel draw during the US Fourth of July holiday week.
The Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for robust growth in global oil demand in 2024 and the following year, attributing it to resilient economic growth and increased air travel during the summer months. However, the gains were limited due to minimal supply disruptions at refineries and offshore production facilities caused by hurricane Beryl. Additionally, the market is awaiting US inflation data, including the release of the Consumer Price Index on Thursday and the Producer Price Index report on Friday, which could have an impact on the market sentiment. Expectations of a 25-basis-point rate cut by September have increased to 74%, indicating a growing likelihood of reduced interest rates, which could potentially stimulate economic activity and oil demand.
Lower interest rates are expected to decrease the cost of borrowing, leading to increased economic activity and subsequently, higher oil demand. Federal Reserve Chair Jerome Powell stated that interest rate decisions will be made as needed, denying any political motive behind a potential rate cut in September. This assurance from the central bank aimed to dispel concerns that a rate cut could be perceived as a move influenced by the upcoming presidential elections. Overall, the oil market remains sensitive to various factors, including supply disruptions, demand outlook, inflation data, and interest rate decisions, all of which can influence oil prices in the near term.
