Oil prices rise on US stockpile draw

Oil prices edged higher on Thursday, with WTI price rising to the $79.4 per barrel level. If WTI price declines, it may encounter support near $75.8 per barrel, while resistance may be found near $80.0 per barrel.

US crude oil inventories released on Wednesday showed a surprisingly large draw in US crude stockpiles, boosting oil prices. The US Energy Information Administration reported that weekly crude stocks fell by 2.5M barrels for the week to May 10th, against expectations of a smaller drop by 0.4M barrels and a drop by 1.4M barrels the week before.

Supply concerns provide support for oil prices, as the crisis in the Middle East threatens to disrupt oil distribution. Tensions around the Red Sea area raise concerns that hostilities may spread further in the Middle East, affecting oil supply and distribution. 

Oil prices are kept in check by high Fed interest rates. The US Federal Reserve kept interest rates unchanged at its latest policy meeting within a target range of 5.25% to 5.50%. The US Fed is keeping interest rates at a 23-year high, restricting economic growth and limiting the oil demand outlook as a result. Odds of rate cuts are becoming more moderate, putting pressure on oil prices, as policymakers have stated that they do not intend to start reducing interest rates until there is more evidence of disinflation.

Renewed rate cut expectations boosted oil prices on Wednesday, however, after the release of the US inflation report. Inflationary pressures in the US are easing, which may allow the US Federal Reserve to start cutting interest rates by September.

OPEC+ kept existing output cuts in place at its latest meeting, boosting oil prices. OPEC kept its output policy steady in April, maintaining its voluntary production cuts of 2.2 million barrels per day. OPEC’s monthly report published on Tuesday showed that the organization’s crude oil output dropped by 48,000 barrels per day in April compared to March, corresponding to a 0.18% decline.

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Written by:
Myrsini Giannouli

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