Strong US data, Brent stocks fall, WTI prices

By Adedapo Adesanya

Prices of the two major crude grades rose on Wednesday from two-month lows in the previous session, as the market balanced upbeat economic data and crude stockpiles against forecasts of weaker global demand growth.

Brent futures rose 37 cents, or 0.5 percent, to $82.75 a barrel, and U.S. West Texas Intermediate (WTI) futures gained 61 cents, or 0.8 percent, to $78.63 dollars per barrel.

Earlier in the session, a bearish report from the International Energy Agency (IEA) helped boost both benchmarks.

The IEA cut its forecast for oil demand growth in 2024, widening the gap with the Organization of the Petroleum Exporting Countries (OPEC) on expectations for this year’s global demand outlook.

Global oil demand this year will rise by 1.1 million barrels per day (bpd), the Paris-based agency said in a monthly report, down 140,000 bpd from its previous forecast, citing in largely weak demand in developed OECD countries.

The agency said the lower forecast for 2024 was linked to weak industrial activity and lower consumption, particularly in Europe, where a falling share of diesel cars is already undercutting consumption.

In its monthly report on Tuesday, OPEC maintained its expectation that global oil demand would rise by 2.25 million barrels per day in 2024. The 1.15 million bpd difference represents about 1 percent of global demand.

Prices reversed course after US data showed a bigger-than-expected drop in crude oil and tepid inflation fueled expectations of a rate cut later this year.

U.S. crude oil inventories fell by 2.5 million barrels last week, the Energy Information Administration (EIA) said.

That change in inventories compared with a modest draw of 1.4 million barrels for the previous week and an unexpected decline of 3.1 million barrels for the week to May 10, the American Petroleum Institute (API) estimated on Tuesday. .

U.S. consumer prices rose less than expected in April as they rose 0.3 percent last month after rising 0.4 percent in March and February, the Labor Department’s Bureau of Labor Statistics said from the country.

That suggested inflation resumed its downward trend at the start of the second quarter, in a boost to financial market expectations the US Federal Reserve will cut interest rates in September.

Lower interest rates would reduce borrowing costs for businesses and consumers and could boost economic growth and oil demand.

With the US central bank expected to cut interest rates later this year, the US dollar fell to a five-week low against a basket of other currencies.

A weaker dollar can boost demand as goods denominated in greenbacks become less expensive to buy in other currencies.

Reuters reported that OPEC and its allies, OPEC+, may hold its June 1 oil policy meeting online rather than at its headquarters in Vienna as currently scheduled.

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