Oil prices stayed steady on Thursday, reassuring investors after earlier gains driven by larger-than-expected declines in U.S. crude inventories.
Brent crude futures rose by 13 cents to $84.95 a barrel, while U.S. West Texas Intermediate (WTI) crude fell by 6 cents to $82.79. Both benchmarks had seen increases in the previous session.
Tamas Varga, an oil broker at PVM, noted that the market is experiencing profit-taking ahead of the release of U.S. jobless claims data. This data will influence investors’ expectations regarding potential interest rate cuts later in the day.
Data from the U.S. Energy Information Administration revealed a 4.9 million barrel drop in U.S. crude stocks last week, exceeding analysts’ expectations of a 30,000 barrel decline. Priyanka Sachdeva, senior market analyst at Phillip Nova, highlighted that despite concerns over modest Chinese growth, strong demand signals from the U.S. outweigh these worries. Sachdeva also pointed out that anticipation of interest rate cuts by the Federal Reserve and ongoing summer travel in the U.S. support oil demand from the world’s largest economy.
The prospect of rate cuts in the U.S. and Europe in the coming months has uplifted market sentiment, bringing optimism among investors. Federal Reserve officials hinted at a potential rate reduction given favourable inflation trends and a stable labour market. Meanwhile, the European Central Bank is expected to keep rates unchanged but has signalled a possible future cut.
There are lingering concerns over Chinese economic growth, with leaders indicating continuity in monetary policies without providing detailed updates. Zhang Zhiwei, chief economist at Pinpoint Asset Management, noted that the lack of clarity on macroeconomic policy changes is dampening investor expectations.
The decline of the U.S. dollar for a third consecutive session has also influenced market dynamics, potentially boosting oil demand. This decline makes dollar-denominated commodities more affordable to buyers holding other currencies.
