Oil prices rebounded from 2-month lows on US macro data, against weak IEA forecasts; Brent is approaching $83/bbl

International crude oil prices rebounded from two-month lows earlier in the session on Wednesday, May 15, as the market balanced somewhat upbeat U.S. economic and storage data against 2024 forecasts of weaker global demand growth. oil from the Paris-based International Energy Agency. (IEA).

Brent futures were up 33 cents, or 0.4 percent, at $82.71 a barrel, while U.S. West Texas Intermediate (WTI) crude was up 43 cents, or 0.6 percent, to $78.45. Brent hit an 11-week low of $81 a barrel earlier in the session. Domestically, crude oil futures remained flat ₹6,551 per barrel on the commodity exchange (MCX).

What drove the price of crude oil?

– The US Energy Information Administration (EIA) said energy firms drew 2.5 million barrels of crude oil more than expected in the week ended May 10. That compares with the 0.5 million barrel draw seen by analysts in a Reuters poll and the 3.1 million barrel decline indicated in data from the American Petroleum Institute (API), an industry group.

-US consumer price index (CPI) inflation rose less than expected in April, suggesting inflation resumed its downward trend at the start of the second quarter, in a boost to market expectations financial reports that the US Federal Reserve will cut interest rates in September.

-Expectations were boosted by other US macro data showing retail sales were unexpectedly weak last month as inflation-weary consumers cut spending at online retailers and car dealerships. Lower interest rates would reduce borrowing costs for businesses and consumers and could boost economic growth and oil demand.

-With the Fed still 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 global oil demand by making fuel less expensive in other countries.

-Oil prices also gained support from news in Canada, where a large fire is slowly closing in on the large Canadian tar sands city of Fort McMurray, and about 6,000 people in four suburbs have been told to evacuate. This fire could lead to a reduction in oil reserves in Canada.

-The IEA cut its forecast for oil demand growth in 2024, widening the gap with the Organization of the Petroleum Exporting Countries (OPEC) producer group on expectations for this year’s global demand outlook. The IEA’s weak forecast for oil demand for 2024 sent crude prices down to a two-month low in today’s session.

– OPEC and its allies such as Russia (OPEC+) are likely to hold their June 1 oil policy meeting online, four OPEC+ sources said, rather than in Vienna as currently scheduled. The output policy decision is widely watched by traders and analysts as the market is highly volatile on macro data and rate decisions.

Where are prices headed?