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Boosted by Multiple Factors
Oil prices climbed on Wednesday, propelled by a combination of factors including a weakening U.S. dollar, inventory declines, and optimistic inflation data. Brent crude futures surged by 0.5% to reach $82.77 a barrel, while U.S. West Texas Intermediate crude futures (WTI) also rose by 0.5% to $78.44 a barrel.
Market sources, citing American Petroleum Institute figures, reported a significant decrease in U.S. crude oil inventories by 3.104 million barrels in the week ended May 10. Gasoline inventories followed suit, falling by 1.269 million barrels, while distillates rose modestly by 673,000 barrels.
Anticipation of heightened fuel demand, particularly as refineries increase their runs to meet the upcoming peak northern hemisphere summer driving season, further supported the upward trend in oil prices.
IEA Forecast Adjustment
However, the International Energy Agency (IEA) tempered its forecast for 2024 oil demand growth by 140,000 barrels per day (bpd) to 1.1 million bpd. This adjustment primarily stemmed from weak demand in developed OECD nations.
Analysts foresee oil prices maintaining a range between $80-$90 through the second quarter of 2024. Beyond this period, a bearish trend is anticipated due to factors such as non-OPEC supply growth, diminishing OPEC+ capacity, and softer-than-expected demand amid persistent inflation.
Investor attention remains on U.S. consumer price index (CPI) data scheduled for release, with expectations that it will provide insights into potential interest rate cuts by the Federal Reserve. Such cuts could stimulate economic activity and subsequently drive fuel demand.
Oil prices also received a boost from a softer U.S. dollar and concerns surrounding Canadian oil supply, particularly with a large wildfire nearing Fort McMurray, the central hub for Canada’s oil sands industry. This industry accounts for a significant portion of the country’s crude oil output.
