Oil prices rises on Friday, driven by a boost in demand from the top consumers in the world, the United States and China, coupled with the news of the US Federal Reserve showing signs of possible rate cuts in future.
Brent futures went up by 49 cents or 0.6% to $83.45, while US West Texas Intermediate futures got up by 60 cents or 0.7% to $79.53. However, both the crude oil contracts are slightly down in the week so far, with WTI and Brent going down by 0.5% and 0.1%, respectively.
Data released by the Energy Information Administration showed that the gasoline inventories held by the USA went down by 4.5 million barrels last week, while distillate stocks fell by 4.1 million barrels. Both fell as unexpected demand returns.
ANZ Research said in a note that, “With the U.S. driving season just on the horizon, the market could get even tighter in coming weeks.”
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The Second largest Economy
As oil prices rises in the world as top consumers boost their demand, in China the imports of crude oil went up by 5.1% in the first two months of the year 2024, compared to a year earlier. India’s fuel consumption also increased by 5.7%, amid a strong manufacturing activity.
Capital Economics in a note said that, “After accounting for this year’s extra day in February, crude oil imports in China were up 3.3% in annual terms, which are in line with the expectations of a demand increase for the year.”
“However that growth will remain substantially lower than in 2023, when the end of zero-COVID restrictions led to a surge in activity in transport and travel,” they added.
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Federal Reserve Sends Positive Signs
Further supporting the oil prices, Federal reserve Chair Jerome Powell on Thursday said that the US is not far behind from gaining enough confidence that the inflation is under control and is falling sufficiently to start thinking of interest rate cuts.
Yeap Jun Rong, a market strategist at IG viewed that the “Weakness in the U.S. dollar may have offered some support thus far, as Powell’s comments seem to fall short of the hawkishness that was initially expected.”
In Canada, a major oil pipeline of TC Energy (TRP.TO) resumed its service on Thursday after briefly going offline and cutting off a major supply of Canadian oil to the US temporarily, which was one of the key factors supporting oil prices previously.