The subdued dollar and Fed chair Jerome Powell’s comments on interest rates help crude benchmarks inch up
08 February 2023 - 07:29
bySonali Paul and Jeslyn Lerh
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Melbourne/Singapore — Oil prices were little changed on Wednesday amid subdued movements in the dollar, and as investors waited for more inventory data for more clues on demand trends.
Brent crude futures rose by 1c to $83.70 a barrel at 4.05am GMT, after gaining 3.3% in the previous session.
US West Texas Intermediate (WTI) crude futures climbed by 15c to $77.29, after jumping 4.1% in the previous session.
Oil benchmarks are expected to retain support after US Federal Reserve chair Jerome Powell sounded less hawkish on interest rates than markets had expected, while the latest data showed US crude inventories fell despite earlier expectations of a climb.
“The improved risk sentiment in the aftermath of Fed chair Jerome Powell’s comments, along with a weaker US dollar, seem to be tapped on for some upside in oil prices, after seeing a lacklustre performance since end-January,” said IG’s market analyst, Yeap Jun Rong.
“The reservation is that the overnight downside reaction in the US dollar has been more measured as compared to before,” said Yeap, adding that any continued recovery in the dollar could still serve as a headwind for oil prices.
The dollar index was down slightly on Wednesday, extending losses after Powell’s comments on Tuesday, making oil cheaper for those holding other currencies.
With less aggressive interest rate hikes in the US, the market is hoping the world’s biggest economy and oil consumer can dodge a sharp slowdown in economic activity or even a recession and avoid a slump in oil demand.
“I think we’re in a reasonably balanced market,” said Westpac senior economist Justin Smirk.
“If we have stronger than expected growth out of the developing world, [oil] prices will be firmer and Opec will have to step up output. That’s not our core view. We don’t see a big surge in demand,” he said.
Supporting the market, weekly inventory data from the American Petroleum Institute (API) industry group showed crude stocks fell by about 2.2-million barrels in the week ended February 3, according to market sources.
That defied expectations from nine analysts polled by Reuters, who had estimated crude stocks grew by 2.5-million barrels.
However, gasoline and distillate inventories rose more than expected, with gasoline stocks up by about 5.3-million barrels and distillate stocks, which include diesel and heating oil, up by about 1.1-million barrels.
The market will be looking to see if data from the US Energy Information Administration (EIA), due at 3.30pm GMT, confirms the decline in crude stocks.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil rises as investors await US inventory data
The subdued dollar and Fed chair Jerome Powell’s comments on interest rates help crude benchmarks inch up
Melbourne/Singapore — Oil prices were little changed on Wednesday amid subdued movements in the dollar, and as investors waited for more inventory data for more clues on demand trends.
Brent crude futures rose by 1c to $83.70 a barrel at 4.05am GMT, after gaining 3.3% in the previous session.
US West Texas Intermediate (WTI) crude futures climbed by 15c to $77.29, after jumping 4.1% in the previous session.
Oil benchmarks are expected to retain support after US Federal Reserve chair Jerome Powell sounded less hawkish on interest rates than markets had expected, while the latest data showed US crude inventories fell despite earlier expectations of a climb.
“The improved risk sentiment in the aftermath of Fed chair Jerome Powell’s comments, along with a weaker US dollar, seem to be tapped on for some upside in oil prices, after seeing a lacklustre performance since end-January,” said IG’s market analyst, Yeap Jun Rong.
“The reservation is that the overnight downside reaction in the US dollar has been more measured as compared to before,” said Yeap, adding that any continued recovery in the dollar could still serve as a headwind for oil prices.
The dollar index was down slightly on Wednesday, extending losses after Powell’s comments on Tuesday, making oil cheaper for those holding other currencies.
With less aggressive interest rate hikes in the US, the market is hoping the world’s biggest economy and oil consumer can dodge a sharp slowdown in economic activity or even a recession and avoid a slump in oil demand.
“I think we’re in a reasonably balanced market,” said Westpac senior economist Justin Smirk.
“If we have stronger than expected growth out of the developing world, [oil] prices will be firmer and Opec will have to step up output. That’s not our core view. We don’t see a big surge in demand,” he said.
Supporting the market, weekly inventory data from the American Petroleum Institute (API) industry group showed crude stocks fell by about 2.2-million barrels in the week ended February 3, according to market sources.
That defied expectations from nine analysts polled by Reuters, who had estimated crude stocks grew by 2.5-million barrels.
However, gasoline and distillate inventories rose more than expected, with gasoline stocks up by about 5.3-million barrels and distillate stocks, which include diesel and heating oil, up by about 1.1-million barrels.
The market will be looking to see if data from the US Energy Information Administration (EIA), due at 3.30pm GMT, confirms the decline in crude stocks.
Reuters
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