Investing.com – Oil prices edged higher on Thursday as traders digested falling crude inventories and continued rising hopes for US interest rate cuts following weaker-than-expected economic data.
At 2:30 PM ET (18:30 GMT), futures traded 0.7% higher to settle at $82.17 per barrel, while the contract rose 0.8% to $85.71 per barrel. There was no WTI settlement on Wednesday due to a US holiday.
US crude and gasoline inventories are falling
US oil inventories fell by 2.5 million barrels last week in the week to June 14, but while that missed expectations for a 2.8 million barrel drop, it was not as bad as feared following the report of a trade association that showed on Tuesday that weekly US crude oil inventories rose by 2.26 million barrels.
An unexpected drop in weekly gasoline supplies of 2.3 million barrels, compared to forecasts for production of 1.5 million barrels, and a drop in distillate inventories of 1.7 million barrels also contributed to expectations that the typical increase of energy demand during the summer months is now underway. after a slow start.
The US interest rate cuts are stimulated by weaker economic data
The prospect of a Federal Reserve rate cut also helped boost sentiment on oil prices after a wave of weaker-than-expected economic data.
Economic data released earlier Thursday pointed to a slowing economy, which came in at 238,000, above the expected 235,000, while falling 5.5% in May.
According to the Investing.com report, the probability of a rate cut in September rose slightly to 59.5%, up from 57.5% the day before.
Conflicts in the Middle East add geopolitical risks
Oil prices were supported by a growing geopolitical risk premium due to the conflict in the Middle East.
A Greek-owned ship attacked by Yemeni Houthi militants in the Red Sea last week sank, salvagers confirmed Wednesday, after it was hit by missiles and an explosives-laden remote-controlled boat.
Iran-aligned Houthi militants first launched drone and missile attacks on the key trade route in November in what they say is solidarity with Palestinians in Gaza.
Israeli Foreign Minister Israel Katz warned earlier this week of a possible “all-out war” with Lebanese Hezbollah as the country continues its conflict with Hamas in Gaza.
Strength in the physical market
Also supportive of oil were some signs of strength in the physical market.
“The prompt ICE Brent time spread has strengthened, while the Dated to Frontline (NYSE:) Brent (DFL) swap has moved deeper into positive territory and to its highest level since early May,” ING analysts said in a note.
“Our balance sheet shows the market tightening in the third quarter of this year following the rollover of OPEC+ cuts, so we should see signs of a tightening in the physical market. However, how tight it becomes depends on how demand performs.”
Peter Nurse contributed to this story.
