Investing.com — Oil prices settled higher Wednesday, as a much larger-than-expected draw in U.S. weekly inventories and a slump in the dollar offset the IEA’s weaker forecast for demand growth this year.
At 14:30 ET (18:30 GMT), Brent oil futures rose 1% to $82.85 a barrel, while West Texas Intermediate crude futures rose 1% to $78.63 a barrel.
US inventories shrink more than expected
U.S. oil inventories fell by 2.5 million barrels last week barrels in the week to May 9, a markedly steeper decline than the draw of 400,000 barrels expected.
Gasoline inventories unexpectedly fell by 235,000 barrels, compared with forecast for a build of 888,000 barrels, while distillate inventories fell by 45,000 barrels compared with forecasts for a build of 770,000.
The reading spurred some hopes that U.S. fuel demand was picking up with the advent of the travel-heavy summer season – a trend that could help tighten global crude supplies, even as U.S. production remains at record highs.
The signs of improving demand helped offset worries following fresh forecasts from the International Energy Agency that indicate point to weaker demand.
IEA cuts 2024 growth forecast
The International Energy Agency cut its forecast for 2024 oil demand growth earlier Wednesday, citing weak demand in developed OECD nations, in particular in Europe.
The Paris-based organization, in its monthly report, lowered its growth outlook for this year by 140,000 barrels per day to 1.1 million bpd, and marginally lifted its 2025 oil growth forecast to 1.2 million bpd.
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The IEA said its lower 2024 oil demand forecast was linked to weak economic growth, particularly in Europe, where a declining share of diesel cars was already undercutting consumption.
“Combined with weak diesel deliveries in the United States at the start of the year, this was enough to tip OECD oil demand in the first quarter back into contraction,” the IEA said.
Dollar slump boosts oil prices as inflation cools
The dollar fell sharply to add extra support to oil prices following U.S. consumer price index data that showed inflation slowed more than expected last month.
As oil is priced in dollars, a weaker greenback makes oil more attractive to foreign investors.
The consumer price index slowed to 0.3% pace in April from 0.4% a month earlier, slower than the 0.4% pace economists had expected, boosting hopes that the disinflation trend is back on track. That took the annual figure to 3.4%, down from a 3.5% pace.
(Peter Nurse, Ambar Warrick contributed to this article.)
