Crude oil prices started trade today in Asia with gains following an industry report that saw yet another weekly decline in inventories as well as a smaller-than-expected increase in producer prices that fueled hopes for a rate cut.
The American Petroleum Institute reported an estimated oil inventory decline of 5 million barrels for last week, following a week of a moderate increase. Based on API weekly data, U.S. oil inventories have gained some 400,000 barrels in total since the start of the year. The EIA will report inventory figures later today.
Meanwhile, the Bureau of Labor Statistics reported a 0.01% increase in producer prices for July, which was below expectations, with the cost of services declining at the fastest rate in nearly 18 months, Reuters noted in a report. The data seems to have reinforced hopes of a rate cut but such a move by the Fed is far from certain.
"Producer price increases cooled this month which is good news for the Fed's inflation fight, but there is no PPI deflation, so Fed officials do not have to rush to judgment and bring rate cuts forward because the economy is headed downhill," Christopher Rupkey, chief economist of FWDBONDS told Reuters.
The price jump today follows a 2% drop in prices on Tuesday, which in turn followed the release of the International Energy Agency's outlook for oil, which featured a warning about slowing demand growth next year. The IEA saw oil demand growing by a modest 950,000 bpd in 2025-a 30,000-bpd downward revision from earlier estimates.
The IEA also expected oil markets to swing into a surplus in the final quarter of this year but only if OPEC started unwinding its production cuts, which the cartel has said repeatedly it would only do if the market conditions are conducive to such a move.
While the IEA maintained its outlook for global oil demand growth, OPEC lowered its demand growth forecast earlier in the week. The cartel justified the alteration by pointing to disappointing Chinese demand, a factor that has been driving bearish sentiment in markets all year.
While oil prices have fallen dramatically over the past month, there has been a relatively strong recovery of late as U.S. recession fears fade, with WTI now moving toward the $79 mark and Brent trading comfortably above $81.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More