Oil rises with falling U.S. stockpiles and improved rate cut outlook
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Oil Prices Rebound Amid Falling U.S. Stockpiles and Rate Cut Hopes
Oil prices bounced back on Wednesday after a three-day downtrend, spurred by reports showing drops in U.S. crude and fuel stockpiles, signaling steady demand. Additionally, prospects for interest rate cuts have brightened the outlook for economic growth and oil consumption.
Brent crude futures increased by 21 cents, reaching $84.87 per barrel by 0055 GMT, recovering from a 1.3% decline in the previous session. Simultaneously, U.S. West Texas Intermediate (WTI) crude saw a rise of 26 cents, hitting $81.67 per barrel after a 1.1% fall on Tuesday. Over the prior three sessions, WTI had dropped 3%, and Brent saw a 3.2% decline, amid concerns over global oil demand and minimal impacts on the Texas energy sector from Hurricane Beryl.
Market sources reported that U.S. crude oil and gasoline inventories fell last week, with crude stocks down by 1.923 million barrels and gasoline inventories dropping by 2.954 million barrels, according to figures from the American Petroleum Institute (API). However, distillate stocks rose by 2.342 million barrels. The drawdown in inventories supported oil prices, indicating sustained summer fuel demand.
Interest Rate Cut Prospects Bolster Prices
Price support also came from U.S. Federal Reserve Chair Jerome Powell's remarks, suggesting increased chances for interest rate cuts, which could spark enhanced economic growth and further oil consumption. Following these comments, investors have gauged a nearly 70% likelihood of a Fed rate cut by September.
Analysts from ANZ highlighted in a Wednesday note that Powell’s statements underscored an improvement in data from the June quarter and indicated that continued positive data would increase confidence in the inflation outlook.
Future Demand and Supply Dynamics
The recovery in oil prices was further underpinned by a U.S. Energy Information Administration (EIA) report released on Tuesday, projecting that global oil demand will surpass supply next year, a reversal from previous forecasts predicting a surplus.
Post-Hurricane Beryl Recovery in Texas
In Texas, oil and gas companies began resuming operations on Tuesday after Hurricane Beryl passed through, though some facilities remained damaged and power had not been entirely restored. Most producers and facilities in the region started to ramp up output as ports reopened, with the hurricane's impact on production expected to be limited.
Investors are keeping an eye on official U.S. oil stock data, expected to be released by the EIA at 10:30 a.m. EDT (1430 GMT) on Wednesday, which could further influence oil price movements.
