Oil Prices Rise in Asian Trade on Thursday, Dollar Weakness Boosts Market Sentiment
Oil prices saw an increase in Asian trade on Thursday, continuing recent gains as the dollar weakened ahead of key U.S. inflation data. This favorable exchange rate benefited oil prices, along with expectations of tighter global supplies.
The dollar's decline this week has drawn attention to the upcoming consumer price index inflation data, which will provide further insight into U.S. interest rates. Additionally, data revealing a surprise draw in U.S. oil inventories supported crude markets, although a significant build in distillates tempered overall optimism. Weak inflation figures from China, a top oil importer, also contributed to market uncertainty.
In trading, Brent crude for September delivery rose by 0.7% to $85.74 a barrel, while WTI crude increased by 0.8% to $81.69 a barrel by 21:16 ET.
The weakening dollar has been a boon for oil prices, as Federal Reserve Chair Jerome Powell's comments on the U.S. economy's trajectory and potential rate cuts have further pressured the greenback. Powell's remarks have shifted focus to the upcoming CPI data, which is expected to reveal a cooling in June's inflation rates. A weaker dollar makes oil more affordable for international buyers, ultimately benefiting crude demand.
Despite the unexpected decrease in U.S. oil inventories, concerns persist over the strength of U.S. demand, particularly as distillates rose during the same period. Traders remain optimistic about tighter U.S. markets in the upcoming weeks, with summer travel ongoing and potential disruptions in oil production from Hurricane Beryl in the Gulf of Mexico. Both OPEC and the International Energy Agency have maintained relatively positive outlooks on global oil demand growth, citing the resilience of the global economy and resurgence in air travel as key drivers.
In conclusion, the interplay between the dollar's weakness, U.S. inventory data, and global demand forecasts has created a dynamic market environment for oil prices. Investors should pay close attention to upcoming economic indicators and geopolitical events to navigate the complexities of the oil market effectively.