Western Texas Intermediate (WTI), the benchmark for US crude oil, is currently trading at approximately $79.30, signaling a slight uptick. This increase comes amidst growing optimism regarding demand in China and the United States, the two largest consumers of crude oil globally.
Official statistics from China revealed a notable 5.45% increase in crude oil imports for April compared to the same period last year. This uptick is seen as a positive sign of improving demand, as noted by Tina Teng, an independent market analyst, who attributed the rise in WTI prices partly to the encouraging China Trade Balance data.
Additionally, a decrease in oil inventories in the United States contributed to the upward momentum of WTI prices. According to the Energy Information Administration (EIA), crude inventories in the US declined by 1.4 million barrels during the week ending May 3, contrasting with the 7.3 million barrel build reported in the previous week. This reduction aligns closely with market projections, which anticipated a decrease of 1.4 million barrels.
Geopolitical tensions in the Middle East added to market concerns, with Israeli forces engaging in military action near populated areas of Rafah following statements from President Joe Biden regarding the withholding of US weapons in the event of a significant invasion of the southern Gaza city. Such uncertainties in the region have the potential to disrupt oil supply, thereby bolstering WTI prices.
However, the strength of the US Dollar (USD), supported by the Federal Reserve’s (Fed) hawkish stance, may act as a counterbalance to the upward movement of USD-denominated oil prices in the near term. San Francisco Fed President Mary Daly highlighted on Thursday the challenges in projecting policy amid uncertainties in the inflation outlook, underscoring the need for further clarity before definitive action is taken.
