Oil prices were relatively unchanged on Thursday, influenced by an unexpected decrease in U.S. crude inventories and the Federal Reserve’s adherence to its rate cut projections for the year.
May Brent crude futures dipped by 3 cents to $85.92 a barrel by 0929 GMT, following a 1.6% decline on Wednesday. May futures for U.S. West Texas Intermediate WTI also fell slightly, by 10 cents or 0.1%, to $81.17 a barrel, after a roughly 1.8% drop in the prior session. The U.S. Energy Information Administration (EIA) revealed a second consecutive week of decline in crude stockpiles in the U.S., the world’s largest oil consumer.
Contrary to analysts’ expectations of a 13,000-barrel increase, inventories saw a 2 million barrel drop to 445 million barrels for the week ending March 15, attributed to higher exports and refinery activity.
“The bullish sentiment persists, with another surprise reduction in U.S. crude reserves last week as the market accounts for the risk of further supply disruptions from the Russia-Ukraine conflict,” remarked Yeap Jun Rong, a market strategist at IG. Gasoline stockpiles experienced their seventh week of declines, falling by 3.3 million barrels to 230.8 million, indicating strong demand for fuel. Refinery output and utilization rates also increased.
The decision by the U.S. Federal Reserve to maintain interest rates between 5.25% and 5.50% on Wednesday, while forecasting three rate cuts within the year, provided a positive signal to investors. Lower interest rates could stimulate economic growth, which is beneficial for oil demand.
The trading of crude at higher prices was also influenced by Ukrainian strikes on Russian refineries, raising concerns about the potential impact on global petroleum supplies. Ukrainian drones have hit at least seven Russian refineries this month, leading to the shutdown of about 7%, or approximately 370,500 barrels per day, of Russia’s refining capacity, as estimated by Reuters. Analysts suggest that prolonged disruptions might force Russian producers to cut supply if they face export and storage challenges.
Additionally, Germany’s economic downturn showed signs of easing in March, with business activity in the service sector nearly stabilizing, according to a preliminary survey.
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