Oil gains more ground on signs of stronger demand

US data showing slower-than-expected inflation bolsters argument for interest rate cut, which may drive even greater consumption

An oil and gas drilling platform stands offshore in the Gulf of Mexico in Dauphin Island, Alabama. Picture: REUTERS/STEVE NESIUS
An oil and gas drilling platform stands offshore in the Gulf of Mexico in Dauphin Island, Alabama. Picture: REUTERS/STEVE NESIUS

Oil prices extended gains from the previous session on Thursday on signs of stronger demand in the US, where data showed slower inflation than markets expected, bolstering the argument for an interest rate cut which could drive even greater consumption.

Brent futures rose 35c, or 0.4%, to $83.10 a barrel at 3.10am GMT, while US West Texas Intermediate crude (WTI) gained 40c, or 0.5%, to $79.03.

“A more tamed read for US April inflation and a far weaker-than-expected read in US retail sales seem to offer room for the Fed to consider earlier rate cuts, with market expectations leaning more firmly for policy easing to kick-start in September this year,” said IG market strategist Yeap Jun Rong.

“The larger-than-expected drawdown in US crude inventories for last week also offered some calm, while geopolitical tensions continue to rock on in the Middle East.”

US consumer prices rose less than expected in April in a boost to financial market expectation for a September rate cut by the Federal Reserve, which could temper dollar strength and make oil more affordable for holders of other currencies.

Elsewhere, US crude oil, petrol and distillate inventories fell, reflecting a rise in both refining activity and fuel demand, showed data from the Energy Information Administration (EIA).

Crude inventories fell 2.5-million barrels to 457-million barrels in the week ended May 10, the EIA said, versus the 543,000 barrel consensus analyst forecast in a Reuters poll.

Signs of slowing inflation and stronger demand were supporting prices, ANZ Research also said in a client note, as is geopolitical risk which it noted remains elevated.

In the Middle East, Israeli troops battled Hamas militants across Gaza, including Rafah which had been a civilian refuge.

Ceasefire talks mediated by Qatar and Egypt are at a stalemate, with Hamas demanding an end to attacks and Israel refusing until the group is annihilated.

Gains were constrained after the IEA trimmed its forecast for 2024 oil demand growth, widening the gap between its view and that of oil cartel Opec.

Global oil demand this year will grow by 1.1-million barrels a day (bbl/day), IEA said, down 140,000bbl/day from its previous forecast, largely due to weak demand in developed nations of the Organisation for Economic Co-operation and Development (OECD).



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