Oil prices remained steady in Asian trade on Thursday as optimism over a larger-than-expected draw in U.S. inventories was tempered by caution ahead of key economic data likely to impact interest rates. The strength of the U.S. dollar also exerted pressure on crude prices, as traders leaned towards the greenback awaiting more signals on interest rates and inflation.
Brent oil futures for July delivery stabilized at $83.61 per barrel, while West Texas Intermediate (WTI) crude futures inched up slightly to $79.29 per barrel by 21:05 ET (01:05 GMT).
U.S. Inventories Shrink More Than Expected
Data from the American Petroleum Institute (API) revealed on Wednesday that U.S. oil inventories fell by nearly 6.5 million barrels for the week ending May 24, significantly surpassing expectations of a 1.9 million barrel draw. Gasoline and distillate inventories also declined, although the reduction in gasoline stockpiles was minimal.
This substantial drawdown often predicts a similar trend in official inventory data, due later on Thursday. The large decrease suggested a rise in U.S. fuel demand with the start of the travel-heavy summer season, marked by the Memorial Day weekend.
U.S. GDP and Inflation Data in Focus
Attention on Thursday was focused on a revised reading of the first-quarter U.S. gross domestic product (GDP), expected to indicate some resilience in the world’s largest economy. While a strong economy provides positive signals for oil demand, it also gives the Federal Reserve more justification to maintain higher interest rates for an extended period, a trend expected to eventually curb demand.
High U.S. interest rates have weighed heavily on oil prices recently, as several Fed officials have emphasized the need for more confidence that inflation is easing before considering rate cuts.
The upcoming release of the Personal Consumption Expenditures (PCE) price index data, the Fed’s preferred inflation gauge, on Friday, is likely to significantly influence the central bank’s interest rate outlook.
OPEC+ Meeting and China’s Economic Data
Beyond the Federal Reserve and interest rates, the oil market is also closely watching the upcoming virtual meeting of the Organization of Petroleum Exporting Countries and its allies (OPEC+), scheduled for June 2. The group is widely expected to extend its current production cuts beyond the end of June.
Additionally, the release of Purchasing Managers’ Index (PMI) data from China, the world’s largest oil importer, on Friday will provide further economic insights and help traders gauge the outlook for oil demand.