Oil prices experienced an increase on Friday, propelled by robust demand from two of the world’s largest consumers, the United States and China. The surge was further fueled by encouraging remarks from the U.S. Federal Reserve regarding potential interest rate cuts.
By 6:08 GMT, Brent crude futures saw a 0.63 percent increase to $83.48. Meanwhile, West Texas Intermediate crude futures rose by 0.85 percent, to $79.60 a barrel. Despite these gains, both contracts had witnessed marginal declines this week, with Brent and WTI experiencing 0.1 percent and 0.5 percent drops, respectively.
Demand indicators
Recent data from the Energy Information Administration reflected a strengthening demand in the U.S., supporting oil prices. Gasoline inventories plummeted by 4.5 million barrels last week, while distillate stockpiles dropped by 4.1 million barrels, surpassing market expectations and signaling robust demand.
Analysts highlighted the impending U.S. driving season, which refers to summer in the Northern Hemisphere, suggesting that oil prices could tighten even further in the coming weeks.
China, the world’s largest importer, recorded a 5.1 percent increase in crude oil imports during the first two months of 2024 compared to the previous year, further supporting oil prices. Meanwhile, India’s fuel consumption surged by 5.7 percent in February, driven by strong factory activity. Capital Economics noted that after adjusting for the additional day in February this year, China’s crude oil imports surged by 3.3 percent annually, aligning with projections of heightened demand for the year.
However, experts cautioned that the growth rate might be slower compared to 2023 due to reduced activity in transport and travel following the easing of COVID restrictions.
Federal Reserve’s influence
Federal Reserve Chair Jerome Powell’s comments on Thursday provided further support for oil prices. Powell indicated that the central bank was nearing a point where confidence in falling inflation might prompt interest rate cuts. This sentiment alleviated concerns of a hawkish stance, supporting oil prices.
Analysts suggested that the weakness in the U.S. dollar also contributed to the surge in oil prices, as the market perceived Powell’s remarks as less hawkish than anticipated.
Read: Gold prices hit new records on Powell’s rate cut hints and weak U.S. data
Canadian pipeline resumption
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