Oil prices continued their upward trend on Thursday, driven by a larger than expected decline in US crude inventories, the world’s largest oil consumer. Brent futures increased by 41 cents, or 0.5%, reaching $85.49 per barrel by 0819 GMT, while US West Texas Intermediate (WTI) crude rose by 69 cents, or 0.8%, to $83.54 per barrel. Both benchmarks had already registered gains in the previous trading session.
US crude inventories fell by 4.9 million barrels last week, according to the US Energy Information Administration. This decline surpassed analysts’ expectations of a 30,000-barrel reduction as forecasted by a Reuters poll, and exceeded the 4.4 million barrel drop reported by the American Petroleum Institute.
Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that strong demand signals from the US outweighed concerns regarding modest Chinese growth from the previous week. She added that hopes of an easing in Federal Reserve interest rates, which could stimulate economic growth, coupled with current summer travel in the US, were maintaining strong oil demand in the world’s largest economy.
The market was further supported by the prospect of interest rate cuts in both the US and Europe in the coming months. Federal Reserve officials indicated on Wednesday that the US central bank is nearing a rate cut due to improved inflation and a more balanced labour market, possibly setting the stage for a reduction in September. Meanwhile, the European Central Bank is expected to keep interest rates unchanged on Thursday but has signalled that a future cut is likely.
Investors are also keenly watching for policy news from a leadership meeting in China concluding on Thursday. Additionally, the US dollar eased for a third consecutive session, which can enhance oil demand by making dollar-priced commodities cheaper for holders of other currencies.
The combination of declining US crude stocks, strong domestic demand, and potential interest rate cuts in major economies has bolstered oil prices. Market participants remain attentive to upcoming policy decisions and economic indicators that could further influence the oil market.
Union Jack Oil plc (LON:UJO) is an onshore oil and gas exploration company with a focus on drilling, development and investment opportunities in the United Kingdom hydrocarbon sector.
