Home Investing News Oil higher on strong US demand, Fed policy in focus

Oil higher on strong US demand, Fed policy in focus


Oil higher on strong US demand, Fed policy in focus By Reuters

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Published Mar 12, 2024 08:33PM ET
Updated Mar 13, 2024 03:41AM ET

© Reuters. FILE PHOTO: A flare burns excess natural gas in the Permian Basin in Loving County, Texas, U.S. November 23, 2019. Picture taken November 23, 2019. REUTERS/Angus Mordant/File Photo

By Jeslyn Lerh

SINGAPORE (Reuters) – Oil prices rose on Wednesday on expectations of strong global demand, including in the world’s top consumer the United States, while somewhat sticky U.S. inflation did not significantly alter expectations that the Fed might start cutting rates soon.

Brent futures for May rose 28 cents, or 0.3%, to $82.20 a barrel by 0730 GMT. April U.S. West Texas Intermediate crude contract gained 28 cents, or 0.4%, to $77.84.

The Organization of the Petroleum Exporting Countries stuck to its forecast of a strong oil demand growth globally of 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025 and raised its economic growth forecast for this year.

In another indication of healthy demand, {{8849|U.S. crcrude oil inventories and fuel inventories fell last week, according to market sources citing American Petroleum Institute figures.

Analysts still believe the Federal Reserve may start cutting rates in the summer despite U.S. consumer prices rising solidly in February on higher costs for gasoline and shelter, suggesting some stickiness in inflation. Lower rates support oil demand.

“The risk environment has largely stayed unfazed, riding on the firm belief that current market pricing for a rate cut only in June will do the job,” said Yeap Jun Rong, market strategist at IG.

The unexpected slide in U.S. crude inventories and strong growth forecasts by OPEC also supported prices, said Yeap.

In a note to clients, analysts at Capital Economics said they still forecast the Fed to start easing policy “around June.”

Oil prices were under pressure in the previous session after the U.S. Energy Information Administration raised domestic oil output forecast but declines were limited on expectations that OPEC+ output cuts will still slow global oil growth and on the recent wave of drone attacks on Russia, including refineries.

Oil higher on strong US demand, Fed policy in focus

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