Oil prices showed little movement during early Asian trade on Thursday, remaining close to their two-week highs. Market participants were evaluating mixed signals regarding U.S. crude inventories while eagerly anticipating further guidance on monetary policy from the Federal Reserve.
This week, crude markets experienced a significant surge as interest rate cuts in China fueled speculations of a demand recovery later in the year. Additionally, the broader commodity markets’ upward momentum encouraged expectations of tighter oil supplies.
The weakening of the dollar provided some support to crude prices, following Federal Reserve Chair Jerome Powell’s less hawkish stance than anticipated during his Senate testimony. Powell is scheduled to testify before the Senate Banking Committee later in the day, offering additional insights into monetary policy.
As of 21:40 ET (01:40 GMT), Brent oil futures advanced by 0.2% to reach $77.07 per barrel, while West Texas Intermediate crude futures remained unchanged at $72.48 per barrel. Both contracts hovered near their strongest levels in the past two weeks.
While data from the American Petroleum Institute (API) revealed a larger-than-expected reduction in overall U.S. oil inventories for the week ending June 16, indicating robust U.S. crude demand, gasoline inventories were projected to have grown for a third consecutive week. This suggested that U.S. fuel demand remained subdued despite the onset of the travel-intensive summer season. Gasoline futures edged lower following the release of the API report.
The official Energy Information Administration (EIA) data, delayed this week due to the Juneteenth holiday, is expected to align with the API findings. The EIA report is anticipated to show an increase of approximately 1.9 million barrels in the previous week, following a substantial build of 7.9 million barrels during the week ending June 9. Moreover, gasoline inventories are also expected to have expanded.
Market attention continued to be fixated on Jerome Powell’s testimony before the Senate Banking Committee later in the day. Participants sought further indications about the future trajectory of interest rates.
During his testimony to the House Financial Services Committee, Powell suggested that the relatively high U.S. inflation was likely to prompt more rate hikes from the central bank. However, he did not specify whether such rate increases would occur in July.
Nevertheless, market sentiment suggests a more than 70% probability of a rate hike in July. Rising interest rates have weighed on oil prices throughout the year, as concerns over deteriorating economic conditions that could impact crude demand persisted.
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