FX168 Financial News (North America) News On Wednesday (May 15), the bullish market balance between the US economy and crude oil storage data and the International Energy Agency's forecast of a weak global economy led to an increase in oil demand. Meanwhile, a fire broke out in the major Canadian oil town, causing the market to worry about crude oil supply. Oil prices rose nearly 1% from a two-month low on the previous trading day.
WTI crude oil futures for June closed up 0.61 US dollars/barrel, or 0.79%, to close at 78.63 US dollars/barrel. As of press release, it is currently reported at $78.86 per barrel, an increase of 1.07%.
(US West Texas Intermediate (WTI) crude oil futures chart, source: FX168)
Brent crude oil futures rose $0.37, or 0.5%, to close at $82.75 per barrel. As of press release, the current report is $82.92 per barrel, an increase of 0.65%.
(Brent crude oil futures chart, source: FX168)
[Market News Analysis]
On Wednesday, Brent crude's premium against WTI fell to its lowest level since March 28. Earlier in the session, a bearish IEA report helped push these two benchmarks into the technically oversold region, where prices were at their lowest level since February. On Tuesday, both benchmark indices closed at their lowest levels since March 12.
Prices reversed after US data showed that crude oil fell more than expected and moderate inflation triggered expectations of interest rate cuts later this year.
The US Energy Information Administration (EIA) said that US crude oil inventories fell by 2.5 million barrels last week, far higher than the 500,000 barrel reduction predicted in the Reuters survey.
Bob Yawger, director of Mizuho Energy Futures, told Reuters: “Demand for crude oil mainly comes from increased refinery utilization... Refiners have finally taken this issue seriously and ultimately increased production.”
Consumer price increases in the US fell short of expectations in April, indicating that inflation resumed a downward trend in the early second quarter, boosting financial market expectations that the Federal Reserve will cut interest rates in September. Lower interest rates will lower borrowing costs for businesses and consumers, and may stimulate economic growth and oil demand.
The US dollar index fell to a five-week low as the Federal Reserve is expected to cut interest rates later this year. A weak dollar can boost demand as commodities denominated in dollars become less expensive to buy in other currencies.
The IEA lowered its forecast for oil demand growth in 2024, widening the gap with OPEC, an organization of oil producers, on the outlook for global demand this year.
OPEC+ sources say the Organization of Petroleum Exporting Countries (OPEC) and its allies such as Russia (i.e. OPEC+) may hold an online oil policy meeting on June 1 instead of in Vienna as currently planned.
Meanwhile, Canada's Alberta Wildfire Service reports that 6,000 people have been evacuated as a result of the fire at Fort McMurray in Alberta, a major Canadian petroleum town. The city is the center of oil sands production in Canada. A fire in 2016 forced 90,000 residents to evacuate and halted production of more than 1 million barrels per day.