Oil prices bounced back on Wednesday after a recent decline, spurred by a report showing reductions in U.S. crude and fuel inventories last week, signaling robust demand and bolstering expectations of interest rate cuts.
Brent crude futures climbed 21 cents to $84.87 per barrel as of 0055 GMT, following a 1.3% drop in the previous session.
U.S. West Texas Intermediate (WTI) crude rose 26 cents to $81.67 per barrel, rebounding from a 1.1% decline in the previous session.
Concerns over weakening global oil demand had pushed WTI down by 3% over the past three sessions, exacerbated by indications that the Texas energy sector emerged relatively unscathed from Hurricane Beryl, which struck the region on Monday. Brent also recorded a 3.2% decline over the same period.
According to market sources citing American Petroleum Institute data on Tuesday, U.S. crude oil and gasoline stocks declined last week, reflecting stable summer fuel demand and driving the market’s recovery after recent losses. Crude inventories reportedly fell by 1.923 million barrels, while gasoline stocks dropped by 2.954 million barrels. However, distillate supplies saw an increase of 2.342 million barrels.
Supporting the rebound were remarks by U.S. Federal Reserve Chair Jerome Powell, suggesting a strengthening case for interest rate cuts. Lower rates typically stimulate economic growth and subsequently increase oil consumption.
Following Powell’s comments, investors have priced in a nearly 70% probability of a Fed rate cut in September.
“Powell’s testimony to the Senate underscored improvements in data throughout the June quarter, while emphasizing that continued positive data would enhance confidence in the inflation outlook,” noted analysts at ANZ in a report on Wednesday.
Expectations of higher oil prices were further bolstered by a U.S. Energy Information Administration (EIA) report on Tuesday indicating that global oil demand is projected to surpass supply next year, reversing a previous forecast of surplus.
In Texas, oil and gas operations resumed on Tuesday following Hurricane Beryl’s passage, although some facilities sustained damage and full power restoration remained incomplete. Most ports reopened, and producers were gradually ramping up production.
