Oil gains ground amid hope for strong US demand

Singapore — Oil prices rose on Wednesday on the hope of strong global demand, including in the world’s top consumer, the US, and as even somewhat sticky US inflation did not significantly alter the expectation the Fed might start cutting rates soon.

Brent futures for May delivery rose 46c, or 0.6%, to $82.38 a barrel by 4am GMT. April US West Texas Intermediate crude contract gained 47c, or 0.6%, to$78.03.

Oil cartel Opec stuck to its forecast of a strong oil demand growth globally of 2.25-million barrels a day (bbl/day) in 2024 and by 1.85-million barrels a day in 2025 and raised its economic growth forecast for 2024.

In another indication of healthy demand, US crude oil inventories and fuel inventories fell last week, according to market sources citing American Petroleum Institute figures.

Analysts still believe the Federal Reserve may start cutting rates in the summer, despite US consumer prices rising solidly in February on higher costs for petrol and shelter, suggesting some stickiness in inflation. Lower rates support oil demand.

“The risk environment has largely stayed unfazed, riding on the firm belief that current market pricing for a rate cut only in June will do the job,” said Yeap Jun Rong, market strategist at IG.

The unexpected slide in US crude inventories and strong growth forecasts by Opec also supported prices, said Yeap.

In a note to clients, analysts at Capital Economics said they still forecast the Fed to start easing policy “around June”.

Oil prices were under pressure in the previous session after the US Energy Information Administration raised domestic oil output forecast but declines were limited on the expectation that Opec+ output cuts will still slow global oil growth and on the recent wave of drone attacks on Russia, including refineries.

Reuters