Key points
- WTI Crude erases earlier losses, but gains seem limited
- US oil inventories decrease more than expected – EIA
- Rate hike concerns, weak China data weigh on oil prices
Futures on US West Texas Intermediate Crude Oil erased earlier losses and edged higher on Thursday, as investors weighed a larger-than-anticipated drop in US oil stocks against demand worries stemming from global interest rate hikes.
Yesterday the black liquid rose nearly 3% after the U.S. Energy Information Administration reported crude oil stocks had decreased by 9.6 million barrels, much more than expected, during the week ending June 23rd.
Still, concerns that global central bank rate hikes could hinder economic growth and weigh on oil demand persisted.
Leaders of major central banks worldwide said on Wednesday that further policy tightening would be required to rein in high inflation. Central bankers said they believed they could achieve such a goal without causing outright recessions.
Federal Reserve Chair Jerome Powell did not rule out the possibility of a rate increase next month.
Meanwhile, European Central Bank President Christine Lagarde reinforced expectations of a ninth successive interest rate hike in July.
Additional pressure on the market came on the back of disappointing China data.
China’s industrial firms registered an 18.8% YoY drop in profits during the first five months of the year. This added to evidence the economy was losing steam and more policy support from the government was needed to prop up economic recovery.
“The lack of prospects for fuel demand growth has limited the gain in oil prices, even with supply curbs by oil producers,” Tetsu Emori, CEO of Emori Fund Management Inc, was quoted as saying by Reuters.
“The impact of the spread of electric vehicles and improvements in energy efficiency in many industries to tackle climate change may be beginning to affect the underlying demand structure itself.”
As of 12:07 GMT on Thursday WTI Crude Oil Futures for August delivery were edging up 0.23% to trade at $69.72 per barrel.
At the same time, Brent Oil Futures for September delivery were inching up 0.04% on the day to trade at $74.27 per barrel.
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