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Oil prices climbed on Wednesday, driven by expectations of robust global demand, particularly from the United States, the world’s largest crude consumer. Sentiment was further boosted by hopes that the Federal Reserve might initiate interest rate cuts soon, despite challenges in curbing inflation in the United States.
Demand-Driven Rally
Expectations of strong global demand, including from the US, propelled oil prices higher. US crude oil inventories and fuel inventories reportedly decreased last week, indicating robust demand. Official US inventory data was awaited for confirmation.
Price Movements
Brent crude futures for May delivery surged by 1%, reaching $82.75 a barrel by 0922 GMT. Similarly, the US West Texas Intermediate crude contract for April rose by 0.8%, reaching $78.15.
Geopolitical Tensions Offset Negative Economic Data
Oil prices experienced a slight decline on Tuesday following negative economic data. However, ongoing geopolitical tensions served to limit the extent of the declines, highlighting the sensitivity of oil markets to geopolitical factors.
Demand Outlook
The Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for oil demand growth at 2.25 million barrels per day in 2024, indicating strong demand prospects. This forecast contrasts with other forecasts, with the International Energy Agency (IEA) expected to issue its latest forecast on Thursday.
Support from Interest Rate Expectations
Oil and broader financial markets found support from sentiment suggesting that slightly higher-than-expected US inflation would not derail the expected interest rate cut by mid-year. Lower interest rates typically support oil demand, contributing to the positive sentiment in oil markets.
Overall, the outlook for oil prices remains bullish, driven by expectations of robust global demand, geopolitical tensions, and supportive monetary policy measures.
