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Business News/ Markets / Commodities/  Oil extends gains after bullish US macro data raises Fed rate cut expectations; Brent nears $84
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Oil extends gains after bullish US macro data raises Fed rate cut expectations; Brent nears $84

Brent had touched an intra-day low of $81.05 on Wednesday - the lowest the front-month futures contract has traded since February 26

Crude oil prices extended gains over positive macro data from the US. (Picture Credits: ONGC official website)Premium
Crude oil prices extended gains over positive macro data from the US. (Picture Credits: ONGC official website)

Oil prices extended gains on Thursday, May 16, over a stabilizing US job market and slower-than-expected inflation data, which increased expectations that the US Federal Reserve would begin to cut interest rates this year. The US consumer price index (CPI) rose 0.3 per cent sequentially, according to data released by the Labor Department's Bureau of Labor Statistics on May 15.

Brent crude futures were up 32 cents at $83.07 a barrel. US West Texas Intermediate crude (WTI) gained 44 cents to $79.07. Brent had touched an intra-day low of $81.05 on Wednesday - the lowest the front-month futures contract has traded since February 26. 

Also Read: IEA vs OPEC: IEA widens gap with OPEC on crude oil demand projections for 2024; June policy decision eyed

However, prices recovered to about 0.5 per cent higher on the day on mixed US oil inventory data that has limited oil prices. On the domestic front, crude oil futures last traded 1.04 per cent higher at 6,619 per barrel on the multi commodity exchange (MCX).

What's pushing crude oil prices?

-The number of Americans filing new claims for unemployment benefits fell last week by 10,000 to a seasonally adjusted 222,000, the US Labor Department said, pointing to both an underlying strength and a steadying of the labor market.

-US consumer prices, meanwhile, were up less than expected in April in a boost to financial market expectations for a September cut to interest rates by the Federal Reserve, which could temper the dollar strength and make oil more affordable for holders of other currencies.

-US crude oil, gasoline and distillate inventories fell, reflecting a rise in both refining activity and fuel demand, Energy Information Administration (EIA) data showed. Crude inventories dropped by 2.5 million barrels to 457 million barrels in the week ended May 10, said the EIA.

-Gasoline demand, however, continued to land under nine million barrels a day for a sixth straight week, below what is typical heading into the summer driving season. The increase in the runs that will likely persist early next month will be going head to head with continued weak product demand that is showing no sign of improvement

-In the Middle East, Israel's tanks pushed into the heart of Jabalia in northern Gaza on Thursday while, in the south, its forces pounded Rafah without advancing, said Palestinian residents and militants. Ceasefire talks mediated by Qatar and Egypt are at a stalemate, with Hamas demanding an end to attacks and Israel refusing until the group is annihilated.

Also Read: India's crude oil consumption up 4.6% in FY24, output rises marginally at 0.6%, imports steady: PPAC

Where are prices headed?

Analysts said that crude oil prices found support from a moderation in U.S. inflation and a weakening dollar index, which hit a six-week low following the release of inflation data. 

‘’Support for crude oil is seen at $77.80–77.10, with resistance expected at $79.20-79.90. In the Indian rupee context, crude oil is supported at Rs6,480-6,410, with resistance at 6,630-6,690,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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ABOUT THE AUTHOR
Nikita Prasad
Nikita covers business news and has been producing news on digital platforms since 2018. She writes on economy, policy, markets, commodities, industry. Her core areas of interests include infrastructure, energy, oil and gas, railways, and transport/mobility. She has worked for business news channels like Moneycontrol, NDTV Profit, and Financial Express in the past. If you have story ideas/pitches/reports or quotes/views to share, reach her at nikita.prasad@htdigital.in.
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Published: 16 May 2024, 10:50 PM IST
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