(New York) Oil ended at its highest level of the year in New York on Wednesday, with fears of tighter global oil supply and slowing US inflation winning the day. on a slight increase in crude inventories in the United States.
A barrel of New York-listed West Texas Intermediate (WTI), for May delivery, gained 2.1% to end at $83.26.
In London, a barrel of Brent North Sea oil for June delivery rose 2.01% to close at $87.33.
“The market ignored the weekly U.S. Oil Inventories report because it was mixed,” said Andy Lipow of Lipow Oil Associates.
Admittedly, it showed a small, unexpected increase in crude reserves in the country due to a drop in exports, a slight increase in production, a small decline in refinery activity and the sale 1.6 million barrels of strategic reserves.
But the report also highlighted a decline in demand, he said.
Market players are instead focusing on the global supply of crude, he says, continuing to digest in particular the announcement by the Organization of the Petroleum Exporting Countries and their allies of further cuts in their production.
At the same time, “various sources show that Russian exports have fallen significantly” while “exports from northern Iraq to Turkey remain stuck in a legal battle”, notes Andy Lipow.
US inflation figures also play a role, according to StoneX’s Fawad Razaqzada.
Inflation in the United States indeed slowed to 5% year on year in March, thus registering at its lowest level for almost two years.
Wednesday’s announcement led some investors to believe that the US central bank “is at the end of its rate hike cycle,” said Fawad Razaqzada.
“Lower interest rate expectations are reducing recession fears and at the same time helping to support the prices of dollar-denominated assets,” such as oil, he said. It also wards off fears of a recession, which could weigh on energy demand.
