Oil Advances as Traders Weigh Inflation Trends and Supply Halts

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Oil rose for the fourth session in five as traders weighed improving inflation trends and supply halts, before the release of OPEC’s monthly market report.

West Texas Intermediate climbed above $73 a barrel, after ending 1.6% lower on Wednesday. US inflation showed signs of moderating in April, giving the Federal Reserve room to pause its aggressive monetary tightening campaign. On Thursday, China reported a near-zero pace of price gains, potentially opening the door to more policy stimulus.

Crude supplies from Canada have been hit by a spate of wildfires across Alberta. In the Middle East, Iraq is still waiting for Turkey to restart exports through Ceyhan port amid a dispute over payments. Output cuts by the Organization of Petroleum Exporting Countries and its allies should continue to tighten supply later this year as long as demand keeps rising.

Oil Rises on Weaker Dollar, Supply Disruptions | Gains come after US inflation showed signs of moderating

Later Thursday, OPEC will issue its monthly global outlook, potentially offering insights into how the market will evolve in the second half of the year.

In the US, the Energy Information Administration’s crude market report on Wednesday offered a mixed picture. Commercial crude stockpiles rose nearly 3 million barrels last week. Still, gasoline and distillate stockpiles fell, data showed.

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“Just maintaining their outlook should ease some of the concerns that has recently helped drive prices lower,” Ole Sloth Hansen, head of commodity strategy at Saxo Bank AS, said of the upcoming OPEC report. “The weekly EIA report was, if anything, bullish given the uptick in demand for gasoline and jetfuel and very low stocks of fuel supporting a recovery in refinery margins from the low levels seen at the start of the month.”

Prices:

WTI for June delivery rose 0.8% to $73.16 a barrel at 10:46 a.m. in London.
Brent for July settlement advanced 0.8% to $77.05 a barrel.

Crude has weakened this year as worries over the Fed’s tightening path and a potential US recession outweighed gains from a surprise output cut by OPEC+.

Should the Fed opt to suspend its tightening cycle, that may undermine the dollar, bolstering the allure of commodities priced in the US currency. A Bloomberg gauge of the greenback rebounded after falling Wednesday. Traders are also closely watching for clues to the pace of China’s growth.

“China’s latest inflation data showed signs of uneven recovery,” said Ravindra Rao, head commodity research at Kotak Securities Ltd. At the same time, “supply disruptions from Iraq and Canada provided a floor for prices,” he said.