Oil & Gas

Oil prices climbed on Thursday, driven by strong demand expectations in the U.S. and a weakening U.S. dollar. Government data revealed a larger-than-anticipated drop in fuel inventories, signaling robust consumption despite lower air travel activity. Brent crude futures rose by 0.5% to $71.12 per barrel, while U.S. West Texas Intermediate (WTI) gained 0.6% to $67.58.

The U.S. Energy Information Administration (EIA) reported a 2.8 million-barrel decline in distillate inventories, surpassing analysts' expectations of a 300,000-barrel drop. Despite lower air travel volumes, analysts maintain that the U.S. oil demand outlook remains strong. Global oil demand reached an average of 101.8 million barrels per day (bpd), an annual increase of 1.5 million bpd. However, U.S. crude inventories rose by 1.7 million barrels, exceeding market predictions of a 512,000-barrel increase.

The weakening U.S. dollar further supported oil prices, as a depreciating dollar makes oil cheaper for holders of other currencies. Investors are optimistic about potential interest rate cuts by the U.S. Federal Reserve, which could further boost energy markets. Phillip Nova analyst Priyanka Sachdeva noted that the dollar’s downtrend since February has provided consistent support for oil prices.

However, geopolitical tensions and economic uncertainties could lead to volatile oil markets. Israel’s renewed ground operations in Gaza and ongoing U.S. airstrikes in Yemen have raised global risk premiums, while analysts anticipate an uneven price uptrend due to OPEC+ production increases and weaker U.S. economic data. OANDA’s senior analyst Kelvin Wong expects a “choppy upward drift” in oil prices, with China’s economic stimulus and geopolitical risks acting as key bullish factors.