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Oil Prices Rebound on Lower US Stockpiles and Rate Cut Hopes
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Last Updated: 10th July 2024 - 12:36 pm
Oil prices rebounded on Wednesday after a three-day decline, spurred by an industry report indicating a drop in U.S. crude and fuel stockpiles last week, suggesting steady demand, alongside improved prospects for interest rate cuts. Brent futures climbed 21 cents to $84.87 a barrel by 0055 GMT, following a 1.3% decline in the previous session.
U.S. West Texas Intermediate (WTI) crude increased by 26 cents to $81.67 a barrel, after a 1.1% drop in the prior session. WTI had fallen 3% over the past three days amid concerns over waning global oil demand and indications that the Texas energy sector remained largely unscathed by Hurricane Beryl, which struck the region on Monday. Similarly, Brent experienced a 3.2% decrease during the same timeframe.
According to market sources referencing American Petroleum Institute (API) data on Tuesday, U.S. crude oil and gasoline inventories saw declines last week, signaling consistent summer fuel demand and aiding the price rebound after several days of decreases.
The API figures revealed that crude stocks fell by 1.923 million barrels in the week ending July 5, while gasoline inventories decreased by 2.954 million barrels. Conversely, distillate supplies rose by 2.342 million barrels.
Additional support for prices came from U.S. Federal Reserve Chair Jerome Powell's comments, which implied a stronger case for interest rate cuts. Lower interest rates are expected to stimulate economic growth and consequently increase oil consumption.
Following Powell's statements, investors maintained nearly a 70% likelihood of a Fed rate cut in September. "Powell's remarks to the Senate affirmed the improvement in data through the June quarter, while maintaining that more good data would boost confidence in the inflation outlook," ANZ analysts noted in a Wednesday report.
The positive outlook for oil prices was further bolstered by a U.S. Energy Information Administration (EIA) report on Tuesday, predicting that global oil demand will surpass supply next year, contrary to an earlier forecast of a surplus. In Texas, oil and gas companies began restarting operations on Tuesday after Hurricane Beryl hit the state, though some facilities experienced damage and power had not been fully restored.
The impact of Beryl on oil and gas production was anticipated to be minimal, with ports reopening and most producers and facilities ramping up output on Tuesday. Investors are now awaiting official U.S. oil stock data from the EIA, set to be released on Wednesday at 10:30 a.m. EDT (1430 GMT).
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