Market Analysis

Oil prices rose for a second consecutive day, driven by a combination of decreasing US oil reserves and a broader sentiment favoring riskier assets, spurred by indications of moderating inflation in the United States.

The international benchmark, Brent crude, surged past $83 per barrel following a 0.5% increase on Wednesday, while the US benchmark, West Texas Intermediate, stood above $79 per barrel. US oil inventories declined by 2.5 million barrels last week, marking the first consecutive drop since March and bringing nationwide reserves to their lowest level in nearly a month.

Across broader financial markets, riskier assets gained ground after a measure of US inflation showed signs of easing for the first time in six months. This development hinted at the possibility of a more accommodative monetary policy stance from the Federal Reserve, prompting a decline in the US dollar for the third consecutive day. A weaker dollar tends to make commodities more appealing to foreign buyers.

While oil prices have maintained an upward trajectory since the beginning of the year due to supply constraints imposed by OPEC+ nations, recent geopolitical tensions in the Middle East have dissipated, and signs of softening demand have emerged, contributing to a moderation in price gains since early April. The International Energy Agency revised its forecast for global demand growth downward by 140,000 barrels per day in a report earlier this week, although it still anticipates global demand reaching a yearly record of 103.2 million barrels per day after revising consumption estimates for last year.

Warren Patterson, head of commodities strategy at ING Groep NV, noted that recent macroeconomic data from the US has heightened expectations of potential rate cuts by the Federal Reserve, lending support to oil prices. However, Patterson emphasized that the oil market remains range-bound and awaits either clarity on OPEC+ policy or a new catalyst to break out of its current pattern.

Paraphrasing text from "Bloomberg" all rights reserved by the original author.