Oil prices rose marginally during trading today, Wednesday, February 8 (2023), amid limited movements in the price of the US dollar.
This comes as investors await more data on US oil inventories to get more clues on demand trends.
Oil prices today
By 07:31 a.m. GMT (10:31 a.m. Mecca time), the price of benchmark Brent crude futures – for delivery in April 2023 – rose 0.06%, to $83.74 a barrel.
And the price of futures contracts for US West Texas crude – delivery in March 2023 – increased by 0.27%, to $ 77.35 a barrel, according to data viewed by the specialized energy platform.
And oil prices ended their trading, yesterday, Tuesday, February 7, with an increase of more than 4%, supported by optimism about demand in China.
Oil market conditions
Oil prices are expected to hold support after Federal Reserve Chairman Jerome Powell appeared less hawkish on interest rates than markets had expected, while recent data showed a decline in US crude oil inventories despite earlier expectations of an increase.
“It appears that the improved risk sentiment in the wake of Fed Chair Jerome Powell’s comments, along with the decline in the US dollar, has exploited some bullishness in oil prices, which have been underperforming since end of January.”
“The reservation is that the overnight negative reaction in the dollar was more calculated than it used to be,” Yip added.
He noted that any sustained recovery in the dollar could remain a headwind for oil prices, Reuters reported.
The dollar index – which measures the US currency against a basket of 6 major currencies – fell slightly today, Wednesday, extending its losses after Powell’s comments on Tuesday, which made oil cheaper for those who have other currencies.
demand for oil
With less interest rate increases in the US, the market is hoping that the world’s largest economy and oil consumer can avoid a sharp slowdown in economic activity or even a recession and avoid a decline in oil demand.
“I think we’re in a reasonably balanced market,” said Westpac chief economist, Justin Smirke, according to Reuters.
He added, “If we have stronger growth than expected from the developing world, oil prices will improve and OPEC will have to increase production. This is not our basic view, as we do not see a significant increase in demand.”
US oil stocks
Supporting the market, weekly data from the American Petroleum Institute showed that crude inventories fell by around 2.2 million barrels in the week ending February 3rd, according to market sources.
This contradicted the expectations of 9 analysts – polled by Reuters – who estimated the growth of crude inventories by about 2.5 million barrels.
However, gasoline and distillate inventories rose more than expected, with gasoline inventories rising by about 5.3 million barrels and distillate inventories, which include diesel and heating oil, by about 1.1 million barrels.
The market will be looking to see if the US Energy Information Administration data – scheduled for release at 03:30 pm GMT (06:30 pm Mecca time) – confirms the decline in crude stocks.
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