Oil prices rallied on Thursday after clawing back some of the losses from the previous day as demand for the commodity in the United States, the world’s top oil consumer, surged.
Brent crude oil, the international benchmark Nigerian oil, rose by 0.7% to $76.93 per barrel while US West Texas Intermediate (WTI) oil gained 0.7% to $73.04 per barrel, the first weekly gain in amount.
Experts attributed the increase in oil prices to a 3.2 million barrels decline in US gasoline inventories last week. The quantity was high than the 1.2 million barrels forecast by analysts.
The unexpected drop is a clear indication of stronger demand for transport fuels and reflects positively on the market.
While investors await news on raising the US government’s $31.4 trillion debt ceiling the standoff between Democrats and Republicans has resulted in the cost of insuring exposure to US government debt hitting record highs as Wall Street grows increasingly concerned about the risk of an unprecedented default.
PVM analyst, Tamas Varga, believes that once a compromise is reached, investors will be encouraged to act, and stocks will probably rally, providing invaluable support for oil.
On Wednesday, US data showed a key inflation measure monitored by the Federal Reserve eased somewhat, potentially providing cover for the central bank to pause further increases to interest rates next month. Higher rates can weigh on oil demand.
The rise in oil prices is a good indication of the growing confidence in the market, and investors are hoping that the positive trend will continue.