Investing.com – Oil prices rose in Asian trading on Wednesday, boosted by industry data that showed a larger-than-expected decline in U.S. inventories. Weak inflation data also fueled hopes of deeper interest rate cuts.
Sentiment towards oil markets was also tense as traders expected a retaliatory strike by Iran against Israel, which could occur this week and is likely to lead to an escalation of geopolitical tensions in the Middle East.
Oil and gas expiring in October rose 0.5 percent to $81.09 a barrel, while prices rose 0.5 percent to $77.21 a barrel by 8:58 p.m. ET (00:58 GMT).
API: US inventories shrink more than expected
Data from the U.S. Petroleum Department showed that U.S. oil inventories fell by 5.2 million barrels in the week ended August 10, well above expectations of 2 million barrels.
Gasoline stocks declined, while distillate stocks rose slightly.
The figure, which normally precedes a similar reading throughout the year, showed that demand in the world’s largest fuel consumer remained robust even as the travel-heavy summer season came to an end.
The reading helped oil bulls overlook the Organization of the Petroleum Exporting Countries’ (OEP) recent cut in its forecast for demand growth in 2024 and allayed concerns that a slowdown in U.S. economic growth could hurt demand.
The International Energy Agency also lowered its forecast for oil demand in 2024 this week.
Bets on interest rate cuts increase with upcoming consumer price index data
On the US economic front, weaker-than-expected data on Tuesday fuelled hopes of a cooling of inflation and greater motivation for the US Federal Reserve to cut interest rates.
The reading came just ahead of the release of inflation data expected later on Wednesday and is also likely to show that inflation eased, albeit only slightly, in July.
The prospect of rate cuts paints a more positive picture for the U.S. economy, especially given recent concerns that the Fed may need to cut rates further due to slowing growth.
According to CME Fedwatch, traders were leaning toward a 50 basis point cut in September rather than a 25 basis point cut after Tuesday’s data.
In addition to the inflation data, figures on industrial production and retail sales from the USA and China are also due this week.
