Oil prices were steady on Thursday as a drop in US crude stocks offset concerns related to demand and a strong dollar.
Brent, the benchmark for two-thirds of the world’s oil, was trading 0.19 per cent higher at $79.61 a barrel at 11.41am UAE time, while West Texas Intermediate, the gauge that tracks US crude, was up 0.11 per cent at $75.45.
On Wednesday, Brent settled 0.21 per cent lower at $79.46 a barrel, while WTI was down 0.53 per cent at $75.35.
“Oil was steadily rising over the past few weeks on expectations that Russia and [Saudi Arabia] would keep this market tight,” said Edward Moya, senior market analyst at Oanda.
“Russia’s refined cargoes are rising and appear to be heading towards a three-month high. The Kremlin might not be motivated to live up to their export pledge, especially considering Russian military efforts are intensifying,” Mr Moya said.
US crude inventories, an indicator of fuel demand, fell by about 700,000 barrels to 457.4 million barrels in the week ending on July 14, according to the US Energy Information Administration.
However, analysts polled by Reuters were expecting a drop of 2.4 million barrels.
Petroleum stocks decreased by 1.1 million barrels last week, while distillate stocks rose slightly, the EIA data showed.
The US Dollar Index – a measure of the value of the greenback against a weighted basket of major currencies – has gained 0.32 per cent over the past week. It was last down 0.18 per cent at 100.10.
A stronger dollar makes oil more expensive for holders of other currencies, hurting crude demand.
Inflation in the UK fell to 7.9 per cent in the year to June, down from 8.7 per cent in May and the lowest rate in 15 months, according to the Office for National Statistics.
Core inflation, which excludes items such as energy, food and tobacco, rose by 6.9 per cent in the year to June, down from 7.1 per cent in May, which was the highest rate since March 1992.
“Disinflation is happening everywhere and that is good news for stock market bulls. UK prices are still high, but cooling inflation could support the argument that the [Bank of England] will be done tightening after the September meeting,” Mr Moya said.
Sluggish economic growth in China, the world’s biggest crude importer, has weighed on oil futures this week.
China’s GDP expanded by an annual 6.3 per cent from April to June, after growing by 4.5 per cent in the previous three months, as the country reopened after removing Covid-19 restrictions, according to the National Bureau of Statistics.
However, the pace of growth in the second quarter missed the 7.1 per cent estimate of economists polled by Bloomberg and the 7.3 per cent forecast of those surveyed by Reuters.
Quarterly, GDP growth was only 0.8 per cent between April and June, compared with the previous three months.
Weaker-than-expected growth in China has led market to believe in a situation of oversupply, MUFG said in a research note on Thursday.
China still managed to add about two million barrels per day of crude oil to inventories over the month – the largest build since May 2022, the Japanese bank said, adding that moves between supply shortages and oversupply will be “critical” to observe in the coming months.
“Given the tightening that we expect in the oil market further into the second half of this year, we believe it is only a matter of time before Brent crude oil prices quietly spur higher into the low-to-mid $80 a barrel levels,” MUFG said.
Last week, Brent breached the $80 mark for the first time since April as cooling inflation in the US eased concerns about aggressive interest increases by the US Federal Reserve.
“The key lies in if we see a big shift in speculative sentiment. While we have seen an increase in speculative buying in recent weeks, historically it is still fairly modest, particularly when you consider the tightening that is expected in the physical market,” the bank said.
