May 15 2024: Oil prices rose on Wednesday, driven by expectations of higher demand as the U.S. dollar weakened. A report showing declines in U.S. crude and gasoline inventories also contributed to a more supportive economic outlook ahead of inflation data release.
Brent crude futures increased by 39 cents, or 0.5%, to $82.77 a barrel at 0630 GMT. U.S. West Texas Intermediate (WTI) crude futures rose 42 cents, or 0.5%, to $78.44 a barrel.
According to market sources citing American Petroleum Institute figures on Tuesday, U.S. crude oil inventories fell by 3.104 million barrels in the week ended May 10. Gasoline inventories decreased by 1.269 million barrels, while distillates rose by 673,000 barrels.
U.S. government inventory data, expected later on Wednesday, are also likely to show a drop in crude stockpiles as refineries ramp up production to meet increased fuel demand ahead of the peak summer driving season in the northern hemisphere.
Despite these factors, the International Energy Agency (IEA) reduced its forecast for 2024 oil demand growth by 140,000 barrels per day (bpd) to 1.1 million bpd, citing weak demand in developed OECD nations.
“Prices will remain range-bound between $80-$90 through 2Q24,” said Macquarie global oil and gas strategist Vikas Dwivedi. “After 2Q, we expect oil will become bearish due to non-OPEC supply growth, decreasing OPEC+ spare capacity, and softer-than-anticipated demand due to persistent inflation.”
U.S. consumer price index (CPI) data, also due on Wednesday, should provide clearer indications on whether the Federal Reserve may cut interest rates later this year, potentially spurring the economy and boosting fuel demand.
Additionally, oil prices found support from a softer U.S. dollar and concerns over Canadian oil supply. A large wildfire is approaching Fort McMurray, the hub for Canada’s oil sands industry, which produces 3.3 million barrels per day of crude, accounting for two-thirds of the country’s total output.
