Oil prices rose on Thursday, boosted by a strong outlook for demand in the United States after fuel inventories fell more than expected, and a weaker US dollar.
Brent crude futures were up 34 cents, or 0.5%, to stand at $71.12 a barrel by 0745 GMT, their highest level since March 3. US West Texas Intermediate crude (WTI) gained 42 cents, or 0.6%, to $67.58.
US government data showed a higher-than-expected drawdown last week in distillate inventories, including diesel and heating oil, which fell by 2.8 million barrels, outstripping a drop of 300,000 barrels expected in a Reuters poll.
“US oil demand outlook remains healthy despite lower air travel passenger volumes,” JPMorgan analysts said in a note, adding that reduced US travel activity did not signal broader weakness in the demand outlook.
Global oil demand averaged 101.8 million barrels per day (bpd), an annual increase of 1.5 million bpd, the analysts said.
US crude inventories, rose 1.7 million barrels, however, exceeding expectations for an increase of 512,000 barrels in an earlier Reuters poll.
A weaker greenback also contributed to oil’s gains, with the dollar on a downtrend since the end of February.
“Throughout the week, the weakness of the dollar appeared to provide some support for dollar-denominated oil prices,” said Phillip Nova senior market analyst Priyanka Sachdeva.
Oil investors remain hopeful of the prospect of the Federal Reserve easing interest rates by 50 basis points by year’s end, she added.
Some analysts however are expecting an uneven price uptrend in the near term.
“I am expecting a choppy upward drift in the oil markets right now,” said OANDA’s senior market analyst Kelvin Wong, adding that bullish price drivers are stimulus measures out from China and the return of hostilities between Israel and Hamas.
Global risk premiums rose after Israel launched a new ground operation on Wednesday in Gaza after breaking a ceasefire of nearly two months.
The United States kept up airstrikes on Houthi targets in Yemen in retaliation for the group’s attacks on ships in the Red Sea. US President Donald Trump has also vowed to hold Iran responsible for future Houthi attacks.
Bearish near-term market drivers include the upcoming production rise among OPEC+ members and a likely lackluster US S&P Global Services PMI flash reading for March, OANDA’s Wong added.
