Investing.com — Oil prices settled higher on Wednesday as a much bigger-than-expected drop in U.S. weekly inventories and a slump in the dollar offset the IEA’s weaker forecast for demand growth this year.
At 2:30 PM ET (18:30 GMT), the stock rose 1% to $82.85 per barrel, while it rose 1% to $78.63 per barrel.
US inventories shrink more than expected
US barrels fell by 2.5 million barrels last week in the week to May 9, a clearly steeper decline than the expected decline of 400,000 barrels.
Gasoline inventories unexpectedly fell 235,000 barrels compared to forecasts of an increase of 888,000 barrels, while distillate inventories fell 45,000 barrels compared to forecasts of an increase of 770,000 barrels.
These figures raised some hopes that U.S. fuel demand would pick up with the arrival of the busy summer season – a trend that could help tighten global crude inventories even as U.S. production remains at record highs.
Signs of improving demand helped offset concerns after new forecasts from the International Energy Agency pointed to weaker demand.
The IEA lowers its growth forecast for 2024
The International Energy Agency earlier Wednesday lowered its forecast for oil demand growth in 2024, citing weak demand in developed OECD countries, especially Europe.
The Paris-based organization in its report cut its growth outlook for this year by 140,000 barrels per day to 1.1 million barrels per day, and marginally raised its oil growth forecast for 2025 to 1.2 million barrels per day.
The IEA said the lower forecast for oil demand in 2024 was linked to weak economic growth, especially in Europe, where a declining share of diesel cars was already undermining consumption.
“Combined with weak diesel supplies in the United States at the start of the year, this was enough to cause OECD oil demand to contract again in the first quarter,” the IEA said.
The dollar’s slump boosts oil prices while inflation cools
The dollar fell sharply to provide additional support to oil prices after US consumer price index data showed inflation slowed more than expected last month.
Because oil is priced in dollars, a weaker dollar makes oil more attractive to foreign investors.
The consumer price index slowed to 0.3% in April from 0.4% a month earlier, slower than the 0.4% economists expected, raising hopes that the disinflation trend is back on track. That brought the annual figure to 3.4%, down from a pace of 3.5%.
(Peter Nurse, Ambar Warrick contributed to this article.)
