By Arathy Somasekhar
HOUSTON (Reuters) – Oil prices ticked up on Thursday, helped by unexpected large draws in U.S. fuel stocks, recouping some of the sharp declines seen earlier this week due to a stronger U.S. dollar and worries about rising supply amid slow demand growth.
Brent crude futures were up 40 cents, or 0.5% at $72.70 a barrel at 11:18 am ET (16:18 GMT). U.S. West Texas Intermediate crude futures were up 50 cents, or 0.7% at $68.93.
U.S. gasoline stocks fell by 4.4 million barrels last week, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 600,000-barrel build. Distillate stockpiles, which include diesel and heating oil, fell by 1.4 million barrels, versus expectations for a 200,000-barrel rise.
U.S. gasoline futures spiked after the data to rise about 1% to $1.98 per gallon. Heating oil futures briefly climbed higher but pared the gains to trade at $2.23 per gallon.
Capping oil price gains however, was data showing crude inventories had risen by 2.1 million barrels against analysts’ expectations in a Reuters poll for a 750,000-barrel rise.
The dollar surged to a one-year high on Thursday, extending gains from Wednesday’s seven-month high against major currencies after data showed U.S. inflation in October increased in line with expectations.
A stronger greenback makes dollar-denominated oil more expensive for holders of other currencies, which can reduce demand.
“Crude futures are trying to establish an equilibrium pricing, as a rising U.S. Dollar Index is creating a further headwind, along with a Trump administration that will now have control of Congress, which is likely to roll back most of the Biden administrations energy policies,” Dennis Kissler, senior vice president of trading at BOK Financial, said in a note.
A rally in U.S. 10-year Treasury yields and a surge in the 10-year break-even inflation rate to 2.35% added to demand worries, said Kelvin Wong, senior market analyst at OANDA.
“(This) increases the odds of a shallow Fed interest rate-cut cycle heading into 2025 (and) overall, there is less liquidity to stoke an increase in demand for oil,” he added.
The International Energy Agency said on Thursday global oil supply will exceed demand in 2025 even if cuts remain in place from OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies like Russia, as rising production from the U.S. and other outside producers outpaces sluggish demand.
The Paris-based agency raised its 2024 demand growth forecast by 60,000 barrels per day (bpd) to 920,000 bpd, and left its 2025 oil demand growth forecast little changed at 990,000 bpd.
OPEC has trimmed its oil demand growth forecasts for this year and next, keeping them well above those of the IEA, however.
With slowing demand in China, there are few supply-demand factors supporting bullish oil markets, said Tina Teng, an independent market analyst.
The spread between the front month WTI contract and the second month contract also narrowed this week to its smallest premium since June. The narrowing of the premium indicates that a perception of tight supply for prompt delivery has eased.
This post is originally published on INVESTING.
