The price of Western Texas Intermediate (WTI) crude oil has reached a one-week high near $79.30 on Friday. This increase can be attributed to the optimism surrounding rising demand in China and the ongoing geopolitical tensions in the Middle East. China, one of the world’s largest crude-consuming nations, saw a 5.45% increase in crude oil imports in April compared to the same month last year. This positive data has boosted confidence in the market, with analysts like Tina Teng highlighting the encouraging improvement in demand.
In addition to the demand optimism in China, a decline in oil inventories in the US has also contributed to the upward momentum of WTI prices. Crude inventories in the US dropped by 1.4 million barrels in the week ending May 3, following a 7.3 million barrel build in the previous week. This unexpected drop in inventories has added to the bullish sentiment in the market. Furthermore, the ongoing geopolitical tensions and uncertainties in the Middle East, such as the recent clashes between Israeli forces and Palestinian groups, have raised concerns about oil supply disruptions. This has further supported the increase in WTI prices.
Despite these positive factors, the stronger US Dollar (USD) supported by the hawkish stance of the US Federal Reserve (Fed) could limit the upside potential of the USD-denominated oil. San Francisco Fed President Mary Daly mentioned on Thursday that uncertainty over the inflation outlook makes policy projections difficult until the Fed gains more clarity. This cautious approach from the Fed could potentially cap the gains in WTI prices in the near term.
Looking ahead, market participants will continue to monitor key developments such as demand trends in major consuming nations like China, geopolitical tensions in the Middle East, and the monetary policy outlook from the Fed. Any significant shifts in these factors could impact the direction of WTI prices in the coming days. In the meantime, traders and investors will remain vigilant to assess the risks and opportunities in the oil market, as volatility and uncertainty continue to shape the energy sector.
