Oil Prices Rise on Expected US Inventory Drawdown – Reuters

By Noah Browning

Oil prices experienced an uptick on Wednesday amid expectations of increased demand. This rise was attributed to a weakened U.S. dollar and a report indicating declines in oil and gasoline inventories, along with the anticipation of forthcoming inflation data that could indicate a more favorable economic outlook.

As of 0630 GMT, crude oil futures increased by 39 cents, or 0.5%, reaching $82.77 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures also rose by 42 cents, or 0.5%, to settle at $78.44 a barrel.

According to sources referencing data from the American Petroleum Institute, U.S. crude oil inventories saw a reduction of 3.104 million barrels for the week ending May 10. Additionally, gasoline inventories decreased by 1.269 million barrels, while distillate stocks experienced a rise of 673,000 barrels.

The government is expected to release its inventory data later on Wednesday, which is likely to reflect a further decline in crude stockpiles as refineries ramp up production to meet higher fuel demand during the busy northern hemisphere summer driving season.

Despite the positive momentum, the International Energy Agency (IEA) adjusted its oil demand growth forecast for 2024 down by 140,000 barrels per day (bpd), now predicting an increase of 1.1 million bpd, primarily due to weaker demand from developed OECD countries.

Vikas Dwivedi, a global oil and gas strategist at Macquarie, stated, "Prices will remain range bound between $80-$90 through the second quarter of 2024." He added that after this period, oil prices are expected to decline due to growth in non-OPEC supply, diminishing OPEC+ capacity, and lower-than-expected demand stemming from ongoing inflation.

Additionally, U.S. consumer price index (CPI) data is set to be released on Wednesday, which may provide insight into whether the Federal Reserve is likely to cut interest rates later this year, a move that could stimulate the economy and bolster fuel demand.

Oil prices received further support from the weaker U.S. dollar and concerns regarding Canadian oil supply, particularly due to a significant wildfire threatening Fort McMurray, a key hub for Canada’s oil sands sector that produces 3.3 million barrels per day, accounting for two-thirds of the nation’s total output.