Oil prices rose on Friday after traders noticed signs of easing inflationary pressures in the United States, the world’s largest oil consumer.
Brent crude oil, against which Nigerian oil is priced, had risen by 72 cents, or 0.8% to $86.12 a barrel.
Meanwhile, U.S. West Texas Intermediate (WTI) crude oil climbed by 85 cents, or 1%, to $83.47 a barrel. Both contracts had also gained in the prior two sessions.
Despite these gains, Brent crude oil was poised to fall by about 1% week-on-week after four consecutive weekly increases.
WTI crude oil, on the other hand, remained broadly stable on a weekly basis.
Investor confidence was boosted after data released on Thursday showed that U.S. consumer prices fell in June, fueling hopes that the Federal Reserve might cut interest rates soon.
Lower rates are expected to spur economic growth, thereby increasing fuel consumption.
However, the market is still awaiting more definitive signs of action. While Federal Reserve Chair Jerome Powell acknowledged the recent trend of improving price pressures, he told lawmakers that more data would be needed to strengthen the case for rate cuts.
“Cooling U.S. inflation numbers may support the case for the Fed to kick-start its policy easing process earlier rather than later, but it also adds to the series of downside surprises in U.S. economic data, which points to a clear weakening of the U.S. economy,” said Yeap Jun Rong, a market strategist at IG.
In addition to inflation data, indications of strong summer fuel demand in the U.S. also supported prices. U.S. gasoline demand was at 9.4 million barrels per day (bpd) in the week ended July 5, the highest level since 2019 for the week that includes the Independence Day holiday, according to government data released on Wednesday.
Jet fuel demand on a four-week average basis was at its strongest since January 2020.
“The market will remain range-bound, paralyzed by opposing forces of expected demand recovery fueled by anticipation of a strong summer for fuel consumption … but sentiment remains pegged by ongoing economic weakness and uncertain demand recovery,” said Emril Jamil, a senior oil analyst at LSEG.
The strong fuel demand encouraged U.S. refiners to ramp up activity and draw from crude oil stockpiles. U.S. Gulf Coast refiners’ net input of crude rose last week to more than 9.4 million bpd for the first time since January 2019, government data showed.
However, weaker demand signs from China, the world’s largest oil importer, could counter the positive outlook from the U.S. and weigh on prices.
“The recent downside correction is evidently over, although the speed of further ascent might be hindered by falling Chinese crude oil imports, which plummeted 11% in June from the previous year,” said Tamas Varga of oil broker PVM.
