Oil prices rise on US inventory data, rate hike fears limit gains

May 03, 2023 (MLN): Oil prices rose on Wednesday after US data showed a larger-than-anticipated drop in crude inventories, indicating a rebound in the country's demand outlook, while expectations of rate hikes by major central banks are limiting price increases, as APP reported.

International benchmark Brent crude traded at $75.47 per barrel at 9.47 a.m. local time (0647 GMT), a 0.20% increase from the closing price of $75.32 a barrel in the previous trading session, it added. 

Simultaneously, the American benchmark West Texas Intermediate (WTI) traded at $71.72 per barrel, up 0.08% from the previous session's close of $71.66 per barrel.

Late Tuesday, the American Petroleum Institute (API) announced its estimate of a fall of 3.93 million barrels in US crude oil inventories relative to the market expectation of a 1 million-barrel drop.

The US Energy Information Administration's data on oil stocks will be announced later on Wednesday. A fall in crude stocks in line with the API's expectations would signal a rebound in crude demand in the US, the world's largest oil consumer, and support upward price movements, it noted. 

The fall in the US dollar index, which made crude oil less expensive for foreign buyers, supported the price escalation.

The US dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, fell to 101.483 at 9.34 a.m. (0634 GMT), a 0.24% decline from Tuesday's closing of 101.725, it said. 

Nonetheless, prices remain under pressure ahead of Wednesday's possible interest rate hikes by the US Federal Reserve and the European Central Bank.

Higher interest rates would lead to an economic slowdown, curtailing oil demand.

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