Investing.com– Oil prices rose in Asian trade on Thursday, extending gains from the prior session as a softer-than-expected U.S. consumer inflation reading brought down the dollar and ramped up hopes of interest rate cuts.
A bigger-than-expected draw in U.S. inventories also fueled bets on tighter global supplies in the coming months, while markets waited to see whether an accident in Galveston, Texas, had any bearing on oil supplies.
expiring in July rose 0.5% to $83.17 a barrel, while rose 0.5% to $78.57 a barrel by 20:32 ET (00:32 GMT).
Both contracts were trading higher for the week, as optimism over more fiscal stimulus in China also drove up prices. Beijing said it will begin a massive, 1 trillion yuan ($138 billion) bond issuance as soon as this week.
Any potential supply disruptions from dire wildfires in Canada, which neared the country’s major oil sands regions, also factored into stronger prices.
Soft US CPI data dents dollar, boosts oil
Oil markets were swept up in the broader cheer over soft readings on U.S. inflation, which dented the dollar and saw traders increase bets on a September interest rate cut.
The prospect of lower rates tied into hopes that global economic activity will not cool as sharply as expected in 2024, which in turn bodes well for oil demand.
A softer also factored into stronger oil prices, given that the commodity is priced in the greenback. A weaker dollar also encourages international demand by making oil cheaper to buy.
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US inventories shrink more than expected
Official data on Wednesday showed that U.S. oil shrank a bigger-than-expected 2.5 million barrels in the week to May 10, with and stockpiles also seeing unexpected draws.
The data pushed up hopes that demand was improving in the world’s biggest fuel consumer, especially as the travel-heavy summer season approaches.
Shrinking inventories could also signal tighter U.S. markets, although this notion was offset by production remaining near record highs.
An accident in Galveston, Texas, which resulted in an oil spill, was also in focus for any potential supply disruptions.
But while the prospect of tighter supplies boosted markets, the International Energy Agency forecast that demand was likely to weaken in 2024.
The IEA cut its demand outlook for 2024 by 140,000 barrels per day to 1.1 million bpd.
This contrasted heavily with a forecast from the Organization of Petroleum Exporting Countries that oil demand will amount to 2.25 million bpd in 2024- a forecast the OPEC maintained in a monthly report on Tuesday.