By Alex Lawler
LONDON (Reuters) -Oil rose on Wednesday, supported by signs of strong global demand including from top consumer the United States while hopes that the Federal Reserve might start cutting rates soon also buoyed sentiment despite somewhat sticky U.S. inflation.
In an indication of healthy demand, U.S. crude oil and fuel inventories fell last week, according to market sources citing American Petroleum Institute figures ahead of Wednesday’s official U.S. inventory report.
Brent futures for May rose 83 cents, or 1%, to $82.75 a barrel by 0922 GMT. U.S. West Texas Intermediate crude for April gained 59 cents, or 0.8%, to $78.15.
“With envisaged global stock draws in the second quarter and possibly beyond, heightened geopolitical tension with palpable impact on supply and the approaching rate cuts that will make borrowing and even oil trading cheaper, it is almost beyond comprehension as to why the market is reluctant to break higher,” said Tamas Varga of oil broker PVM.
Oil had fallen on Tuesday after a higher than expected forecast for U.S. crude oil production and bearish economic data, but persistent geopolitical tensions limited declines.
In an earlier sign of strong demand, the Organization of the Petroleum Exporting Countries on Tuesday stuck to its forecast for oil demand growth of 2.25 million barrels per day (bpd) in 2024, higher than many other forecasts.
The International Energy Agency, which expects demand growth to be much lower, updates its forecasts on Thursday.
Oil and the wider financial markets also found support from sentiment that slightly hotter than expected U.S. inflation will not derail interest rate cuts by the middle of the year. Lower rates support oil demand.
“The risk environment has largely stayed unfazed, riding on the firm belief that current market pricing for a rate cut only in June will do the job,” said IG market strategist Yeap Jun Rong.
The unexpected slide in U.S. crude inventories and strong growth forecasts by OPEC also supported prices, said Yeap.
In a note to clients, Capital Economics analysts said they still forecast the Fed to start easing policy “around June”.
Source:reuters