Oil prices hold steady; poised for weekly gains on demand optimism
Oil prices edged higher on Friday and were on track for a positive week, buoyed by milder U.S. inflation, shrinking U.S. inventories, and increased Chinese stimulus, which fueled hopes of rising demand.
Brent oil futures rose 0.1% to $83.29 a barrel, while West Texas Intermediate crude futures gained 0.1% to $79.28 a barrel.
Weekly gains expected Both contracts are poised to end the week with gains between 0.5% and 1%, primarily driven by softer-than-expected U.S. consumer inflation readings.
The April CPI report weakened the dollar and heightened expectations that the Federal Reserve might start reducing interest rates as early as September, which could boost crude demand.
However, this optimism was tempered by several Fed officials cautioning that more evidence of declining inflation was needed before considering rate cuts.
Mixed signals in oil markets This week, crude markets received mixed signals on demand. A larger-than-expected drawdown in U.S. inventories fueled optimism about rising demand as the travel-heavy summer season nears.
Conversely, the International Energy Agency slightly reduced its annual demand forecast, citing global economic uncertainty amid persistent inflation and potentially prolonged high interest rates.
Meanwhile, the Organization of Petroleum Exporting Countries maintained its demand forecast for 2024, anticipating an eventual economic recovery in China and potentially lower interest rates later in the year.
OPEC is also expected to continue its current production cuts beyond the end of June, indicating a tighter supply outlook. Oil inventories falling by less than expected in recent weeks and U.S. interest rates staying higher for longer are likely to impact OPEC+’s proactive, preemptive, and precautionary policy.
We now expect the eight member states with voluntary production cuts to extend them by at least three months ahead of the ordinary meeting at the beginning of June.
More developments from China China announced a significant $1 trillion bond issuance this week, marking Beijing’s first major fiscal stimulus move to support its sluggish economic recovery.
Chinese industrial production exceeded expectations in April, suggesting a continued recovery in the country’s massive manufacturing sector amid increased government support.
However, signs of weak consumption persisted, with retail sales growth falling short of expectations in April and new home prices dropping at the fastest monthly pace in over nine years.
China is expected to hold its benchmark lending rates steady on Monday, though there are growing expectations for a cut in the mortgage reference rate as authorities seek to bolster the housing market.
