Oil Prices Surge on Strong Global Demand and Fed Rate Cut Expectations
In a bullish market, oil prices soared on Wednesday fueled by robust global demand, particularly from the United States, and persistent expectations of a Federal Reserve rate cut in the near future. According to Reuters, even a slight uptick in US inflation failed to dent the anticipation of a potential rate reduction.
Market Movement
Brent futures for May delivery climbed 0.6 percent to $82.38 a barrel while the April US West Texas Intermediate crude contract edged up 0.6 percent to $78.03, signaling a positive sentiment in the oil market.
OPEC’s Outlook
The Organization of the Petroleum Exporting Countries (OPEC) maintained its bullish outlook on oil demand, forecasting a growth of 2.25 million barrels per day in 2024 and 1.85 million barrels per day in 2025. Additionally, OPEC raised its economic growth projection for the current year, underscoring the positive sentiment in the oil market.
US Inventory Data
Furthermore, US crude oil and fuel inventories reportedly declined last week, as per data from the American Petroleum Institute, highlighting healthy demand in the market.
Fed Rate Cut Speculation
Despite a notable increase in US consumer prices in February, primarily driven by higher gasoline and shelter costs, analysts believe that the Federal Reserve could still initiate rate cuts in the summer. Lower interest rates typically boost oil demand, adding to the positive momentum in the oil market.
Market Sentiment
Market strategist Yeap Jun Rong from IG emphasized the prevailing confidence in the market, citing expectations of a rate cut in June as a key driver of the bullish sentiment. The unexpected decline in US crude inventories and OPEC’s optimistic growth forecasts further supported the upward trend in oil prices.
Analysts’ Forecast
Analysts at Capital Economics echoed the sentiment, forecasting the Fed to potentially ease policy around June, contributing to the overall positive outlook in the oil market.
Market Resilience
Despite concerns over rising domestic oil output in the US, the impact on oil prices was limited due to the belief that OPEC+ production cuts will help mitigate the global oversupply. Additionally, recent drone attacks on Russian refineries added to the market resilience, underscoring the bullish sentiment in the oil market.