Oil prices surged in early Asian trading hours on Friday as signs of robust summer demand and decreasing inflationary pressures in the United States boosted investor confidence.
Brent futures climbed 0.4% to $85.77 a barrel, while U.S. West Texas Intermediate crude futures jumped 0.6% to $83.12 a barrel.
Despite gains in the previous two sessions, Brent futures were on track to decline about 1% week-over-week after four weeks of consecutive gains, while WTI futures remained almost unchanged.
U.S. gasoline demand reached 9.4 million barrels per day in the week ending July 5, the highest since 2019 for the week including the Independence Day holiday. Additionally, jet fuel demand on a four-week average basis was at its strongest since January 2020.
The strong fuel demand prompted U.S. refiners to increase activity and deplete stockpiles, which supported prices. U.S. Gulf Coast refiners' crude input exceeded 9.4 million bpd last week for the first time since January 2019.
WTI front-month futures saw their largest premium to the next-month contract since April, indicating near-term supply constraints.
Unexpectedly, U.S. government data on Thursday showed a decline in consumer prices in June, fueling expectations of a potential interest rate cut by the Federal Reserve.
ANZ analyst Daniel Hynes noted that the prospect of monetary policy easing has uplifted sentiment in the commodities sector. A weaker U.S. dollar has also heightened investor interest.
As a result, the dollar slipped for a third consecutive session on Friday, with market participants increasingly betting on a U.S. interest rate cut in September.
Analysis:
Oil prices have risen due to strong summer demand and decreasing inflationary pressures in the U.S. This is a positive sign for the oil market and indicates potential price stability in the near future. The increase in fuel demand has also led to higher refinery activity, which may support prices further. Additionally, the possibility of a Federal Reserve interest rate cut could impact the value of the U.S. dollar and investor sentiment in the commodities sector.