Oil prices rebounded on Thursday, supported by declines in U.S. crude and gasoline inventories, despite signs that the U.S. Federal Reserve may keep interest rates higher for longer.
May Brent crude futures rose 55 cents, or 0.6 percent, to $86.50 a barrel at 04:00 GMT, after falling 1.6 percent on Wednesday.
May West Texas Intermediate futures (WTI) rose 47 cents, or 0.6%, to $81.74 a barrel, after falling about 1.8% in the previous session.
Crude inventories in the United States, the world’s largest oil consumer, fell for a second week, the U.S. Energy Information Administration (EIA) reported on Wednesday.
Inventories unexpectedly fell by 2 million barrels to 445 million barrels in the week ending March 15; This was contrary to analysts’ expectations for a 13,000-barrel increase.
Inventories fell as exports increased and refineries continued to increase their operations. Gasoline stocks fell 3.3 million barrels for the seventh week to 230.8 million, indicating fuel demand remains consistently strong.
Oil refinery production increased by 127,000 barrels per day and utilization rates increased.
While the market continues to price in the risks of further supply disruptions in Russia, last week showed promise for rising prices following an unexpected decline in US crude oil inventories.
Inventory figures provided some support to the market after prices fell the previous day on the mixed outlook of Fed policymakers.
While the U.S. central bank kept interest rates in a range of 5.25% to 5.50% on Wednesday, policymakers have barely maintained their forecast for three rate cuts this year, suggesting borrowing costs could remain high for longer.
Higher rates over a longer period could mean reduced economic growth, which is likely to affect future fuel demand.
But ongoing concerns about how Ukraine’s attacks on Russian refineries, along with other geopolitical turmoil, will affect global oil supplies are also supporting prices.
The market remains cautious about ongoing supply-side issues. Ukrainian drone attacks, which have eliminated 12% of Russia’s total oil processing capacity, and OPEC’s ongoing cuts are likely to tighten the market.
Ukraine has stepped up attacks on Russian oil infrastructure this month, with at least seven refineries targeted by drones in a war that has lasted more than two years. According to calculations, the attacks blocked 7% of Russia’s refining capacity or about 370,500 barrels per day.
In the event of long-term disruptions, reduced crude oil exports, and storage constraints, Russian producers may turn to reducing supply.
