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Oil prices continued their upward trend in Asian trade on Thursday, bolstered by a weakening dollar ahead of key U.S. inflation data and expectations of tighter global supplies.
Dollar Weakness and Rate Cut Bets
The dollar experienced steep losses this week as investors focused on upcoming consumer price index (CPI) inflation data for insights into U.S. interest rate policy. Federal Reserve Chair Jerome Powell’s comments about the possibility of trimming rates before inflation reaches the 2% target further weighed on the dollar and shifted attention to the CPI data, which is expected to show some cooling in June.
A weaker dollar makes oil more affordable for international buyers, thereby boosting crude demand.
Mixed U.S. Inventory Data
Official data revealed an unexpected decline in U.S. oil inventories in the week ending July 5, driven by increased demand during the summer holiday travel season. However, an unexpected rise in distillates inventories raised doubts about the strength of U.S. demand.
Despite this, traders anticipated tighter U.S. markets in the coming weeks due to ongoing summer travel and potential disruptions from hurricane Beryl in the Gulf of Mexico.
OPEC and IEA Forecasts
The Organization of Petroleum Exporting Countries (OPEC) maintained its forecast for relatively strong global oil demand growth in 2024 and 2025, citing resilience in the global economy and resurgent air travel as key drivers. The International Energy Agency (IEA) is expected to release its monthly report later on Thursday, providing further insights into the global oil market outlook.
Price Movement
Brent Oil Futures expiring in September rose 0.7% to $85.74 a barrel, while West Texas Intermediate crude futures rose 0.8% to $81.69 a barrel.
Overall, the oil market is currently navigating a complex landscape, with factors such as dollar weakness, mixed U.S. inventory data, and varying demand forecasts influencing price movements. Market participants will closely monitor the upcoming CPI data and IEA report for further clues on the direction of oil prices.
