Oil prices surged on Thursday, recovering from a three-day decline, due to expectations that the U.S. will replenish its strategic reserves when prices fall. Oil prices declined over 3 percent on Wednesday after the U.S. Federal Reserve kept interest rates steady. This may indicate a decline in economic growth which impacts demand for oil.
By 5:48 GMT, Brent crude futures saw a 0.64 percent increase to $83.97 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures saw a 0.61 percent rise to $79.48 per barrel.
Potential reserve boost supports oil prices
Speculation that the U.S. might start replenishing its Strategic Petroleum Reserve (SPR) if oil prices fall below $79 per barrel supported market sentiment. The U.S. has expressed intentions to restock the SPR after a historic sale from its emergency stockpile in 2022, aiming to buy back oil at $79 or less per barrel. This expectation provided a floor under prices, contributing to the day’s rally.
Several other factors have also been weighing on oil prices, including the U.S. Federal Reserve’s decision to maintain interest rates, signaling potential limitations on economic growth and oil demand. Additionally, a surprise increase in U.S. crude inventories and prospects of a ceasefire in the Middle East added downward pressure on prices.
Read: Oil prices decline for the third day as U.S. crude inventories surge
U.S. crude stocks and OPEC+ output cuts
The U.S. Energy Information Administration (EIA) recently revealed that crude inventories increased by 7.3 million barrels to 460.9 million barrels in the week ending in April 26.
Despite the volatile market conditions, OPEC+ continues to play a crucial role in stabilizing oil prices. Analysts anticipate the alliance to maintain output cuts through the second half of the year in its next meeting on June 1. However, the possibility of easing cuts if prices reach the $90-100+ range provides a soft ceiling for oil prices.
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