Oil Up on Stockpile Draw, Rate Cut Hopes

10 Jul 2024 , 09:39 AM

Oil prices recovered on Wednesday after three days of falls, as an industry data showed that U.S. oil and fuel stockpiles declined last week, indicating solid demand, and the prognosis for interest rate cuts strengthened.

Brent futures increased 21 cents to $84.87 per barrel, after dropping 1.3% the previous day.

U.S. West Texas Intermediate (WTI) crude increased 26 cents to $81.67 per barrel after losing 1.1% the previous day.

WTI has fallen 3% in the past three sessions amid fears about slowing global oil demand and signs that the Texas energy industry was relatively undamaged by Hurricane Beryl, which struck the region on Monday. Brent is down 3.2% in the same time span.

U.S. crude oil and petrol inventories declined last week, according to market sources citing American Petroleum Institute data on Tuesday, indicating that summer fuel demand remains stable and fueling the rebound following days of falls.

The API estimates showed that oil stocks fell by 1.923 million barrels in the week ending July 5, according to sources. Petrol inventories dropped by 2.954 million barrels. However, the distillate supply increased by 2.342 million barrels.

Prices were also bolstered by comments from U.S. Federal Reserve Chair Jerome Powell, who hinted that the argument for interest rate cuts is strengthening. Lower interest rates should stimulate economic growth, and hence increase oil consumption.

Following Powell’s comments, investors maintained a nearly 70% probability of a Fed rate drop in September.

A U.S. Energy Information Administration (EIA) report on Tuesday showed that global oil demand will outstrip supply next year, reversing a previous prediction of a surplus. This backed the outlook for higher oil prices.

Oil and gas businesses in Texas resumed some operations on Tuesday after Hurricane Beryl hit the state, although several facilities were damaged and power was still out.

Beryl’s influence on oil and gas production was predicted to be minimal, and on Tuesday, some ports reopened, while most producers and facilities increased output.

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