April 17, 2024
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Oil Prices Recover After Drop in US Crude and Gasoline Stocks

Amidst signs that the US federal reserve may keep interest rates higher for long, oil prices recover on Thursday, as U.S. crude and gasoline stock drawdowns lent support.

Brent crude futures for May rose 55 cents, or 0.6%, to $86.50 a barrel by 0400 GMT, after falling 1.6% on Wednesday. U.S. West Texas Intermediate futures for May climbed 47 cents, or 0.6%, to $81.74 a barrel, after sliding about 1.8% in the previous session.

The U.S. Energy Information Administration (EIA), had reported on Wednesday that crude inventories in the United States, the world’s biggest oil consumer, fell for a second week.

Stockpiles declined unexpectedly by 2 million barrels to 445 million barrels in the week ended March 15, versus analysts’ expectations in a Reuters poll for a 13,000-barrel rise.

Reuters gathered that Yeap Jun Rong, market strategist at IG, said: “It seems that the bullish mantra is still intact, with yet another unexpected drawdown in U.S. crude inventories last week while market participants continue to price for the risks of further supply disruption on the Russia-Ukraine front.”

The US Federal Reserve held rates at a 23-year high in the 5.25 per cent to 5.50 per cent range and maintained expectations for three cuts before the end of 2024.

The US central bank plans to cut three times before the end of the year, reaffirming its previous forecast from December. That said, the central bank indicated that it needs greater evidence that inflation is easing before it starts taking its foot off the brakes.

Worries of Ukranian attack on Russia, and how it will impact fuel supply, are impacting prices as well.

“The market remains wary of ongoing supply side issues. The Ukrainian drone strikes that took out 12% of Russia’s total oil processing capacity are likely to tighten the market amid the ongoing cutbacks from OPEC,” ANZ Research said in a note, referring to the Organization of the Petroleum Exporting Countries.

Prolonged disruptions could force Russian producers to reduce supply if they are unable to export crude oil and face storage constraints, analysts say.


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