Oil prices rose on Thursday, extending recent gains as weakness in the dollar ahead of key U.S. inflation data benefited prices, while bets on tighter global supplies remained in play.
Dollar retreats ahead of inflation data
The dollar nursed steep losses this week, with focus turning largely towards upcoming consumer price index (CPI) inflation data for more cues on U.S. interest rates. Data showing an unexpected draw in U.S. oil inventories supported crude markets, although an outsized build in distillates limited overall optimism over tighter supplies. Weak inflation data from top oil importer China also dented sentiment towards oil.
Brent Oil Futures expiring in September rose 0.7 percent to $85.74 a barrel, while West Texas Intermediate crude futures rose 0.8 percent to $81.69 a barrel by 21:16 ET (01:16 GMT).
Weaker dollar boosts oil demand
Oil prices benefited from a weaker dollar, as the greenback retreated after Federal Reserve Chair Jerome Powell said the U.S. economy was still headed for a soft landing. Powell also stated that the Fed did not need to wait for inflation to fall below its 2 percent target to begin trimming rates. His comments dented the dollar and put focus squarely on upcoming CPI data, which is expected to show some cooling in inflation in June. A softer dollar benefits crude demand by making oil cheaper for international buyers.
Mixed signals from U.S. oil inventory data
Official data showed on Wednesday that U.S. oil inventories unexpectedly shrank in the week to July 5, amid increased demand due to summer holiday travel. However, doubts persisted over the strength of U.S. demand, especially as distillates inventories unexpectedly grew during the week. Still, traders were positioning for tighter U.S. markets in the coming weeks, with summer travel set to continue, while Hurricane Beryl was also seen causing some disruptions in oil production in the Gulf of Mexico.
OPEC maintains optimistic demand outlook
The Organization of Petroleum Exporting Countries (OPEC) maintained its forecast for relatively strong global oil demand growth in 2024 and 2025, stating that resilience in the global economy and resurgent air travel will underpin demand. The International Energy Agency is set to release its monthly report later on Thursday, and it has maintained a less optimistic forecast on demand than OPEC.
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