Mar 21 2024: Oil prices remained relatively stable on Thursday, supported by an unexpected drop in U.S. crude stockpiles and the Federal Reserve’s consistent outlook on rate cuts for the year.
Brent crude futures for May saw a marginal decline of 3 cents to $85.92 a barrel, following a 1.6% decrease on Wednesday. Meanwhile, U.S. West Texas Intermediate futures for May were down 10 cents at $81.17 a barrel, after a 1.8% fall in the previous session.
The U.S. Energy Information Administration (EIA) reported a second consecutive week of crude inventory decline in the United States, the world’s largest oil consumer. Stocks unexpectedly decreased by 2 million barrels to 445 million barrels in the week ending March 15, driven by rising exports and increased refinery activity, contrary to analysts’ expectations of a minor rise.
Yeap Jun Rong, market strategist at IG, highlighted the bullish sentiment prevailing in the market, as investors continue to factor in the risks of supply disruptions due to the Russia-Ukraine conflict, alongside the unexpected drawdown in U.S. crude inventories.
Additionally, gasoline inventories recorded a seventh consecutive week of decline, dropping by 3.3 million barrels to 230.8 million, signaling robust fuel demand. Oil refinery operations also increased, indicating an uptick in utilization rates.
The Federal Reserve’s decision to maintain interest rates within the range of 5.25% to 5.50%, along with its forecast for three rate cuts this year, contributed to positive market sentiment. Lower rates are seen as beneficial for economic growth and consequently, oil sales.
Investors also reacted to Ukrainian attacks on Russian refineries, which could impact global petroleum supplies. The strikes have led to the shutdown of around 7% of Russian refining capacity, potentially forcing Russian producers to reduce supply if export capabilities are affected.
Additionally, Germany’s economic conditions showed slight improvement in March, particularly in the service sector, according to a preliminary survey released on Thursday.
