Oil prices rebounded on Thursday, rising by 0.7% in both Brent crude futures and U.S. crude futures after dropping more than a dollar a barrel the previous day. The market was supported by stronger fuel demand data from the United States, the world’s top oil consumer.
A significant drop in U.S. gasoline inventories, more than analysts had predicted, reflected a surge in demand for transport fuels in the country, which boosted prices.
Yeap Jun Rong, a market strategist at IG, stated that Brent crude prices had managed to regain some footing, although progress had stalled due to unresolved global banking concerns that put sentiment in check.
However, investors remained cautious as global interest rates continued to rise, driving recessionary fears. Ongoing downside risks to global growth conditions could keep prices range-bound, with a need for a more concrete catalyst for another push higher.
The latest U.S. data showed that consumer prices rose in April, increasing the likelihood that the Federal Reserve would maintain higher interest rates. This could reduce oil demand, further dampening market sentiment.
Moreover, the ANZ analysts stated that the uncertain economic backdrop clouds prospects going forward, with bearish sentiment continuing to permeate commodities markets amid lacking signs of stronger demand.
Despite these concerns, distillate stocks declined, and U.S. jet fuel demand rose to its highest level since December 2019, providing some support to the market.
Investors are also closely watching detailed talks on raising the U.S. government’s $31.4 trillion debt ceiling, with Republicans continuing to insist on spending cuts.
The standoff has rattled investors, sending the cost of insuring exposure to U.S. government debt to record highs, as Wall Street grows more concerned about the risk of an unprecedented default.
In conclusion, oil prices rebounded on Thursday, driven by stronger fuel demand data from the United States. However, the market remained cautious due to unresolved global banking concerns and rising global interest rates that could drive recessionary fears.
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