Oil futures experienced a slight dip on Thursday, as traders weighed expectations of further interest rate hikes against potentially positive U.S. oil inventory data, following preliminary figures indicating a decrease in stocks.
At 0840 GMT, Brent futures retreated by 0.6%, equivalent to a decline of 47 cents, settling at $76.65 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude futures were down 0.6%, or 44 cents, reaching $72.09.
In the previous session, the benchmarks exhibited strength due to the surge in U.S. corn and soybean prices, which raised the possibility of crop shortages reducing biofuels blending and subsequently boosting oil demand.
Nevertheless, caution prevailed in the market following remarks by Fed Chair Jerome Powell, who indicated the likelihood of two 25-basis-point interest rate hikes by year-end, which he considered “a reasonable estimate.”
Anticipating the Bank of England’s 13th consecutive rate hike at 1100 GMT, amid persistent inflationary pressures, investors remained concerned that higher interest rates could hinder economic growth and dampen oil demand.
Despite these factors, oil prices retained most of their gains from the previous session, as market participants awaited fresh catalysts such as official U.S. oil inventory data scheduled for release at 1430 GMT [EIA/S], as well as forthcoming Chinese factory activity data.
Preliminary industry data indicated a surprising decline of approximately 1.2 million barrels in U.S. crude oil inventories last week, defying expectations of a 300,000-barrel build-up [API/S].
Furthermore, an executive from U.S. shale producer EOG Resources (NYSE:EOG) highlighted the potential for rising oil prices due to modest growth in U.S. oil production and output cuts by OPEC+ countries, which would likely constrain supply in the upcoming months.
UBS strategist Giovanni Staunovo commented, “With the seasonal increase in demand anticipated over the coming months, we expect notable declines in oil inventories, which will provide support to oil prices.”
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