Oil hits two-month peak on lower US crude inventories; Brent above $87/bbl, WTI over 11-week high

International crude oil prices of Brent hit their highest level since April 2024 on Thursday, July 4, holding above the $87/barrel-mark after industry data showed a decline in US inventories. The surge in crude prices followed a larger-than-expected decline in US crude stocks after the US Energy Information Administration (EIA) reported a 12.2 million draw in inventories.

Brent crude futures were last up 13 cents, or 0.2 per cent, at $87.47 per barrel. US West Texas Intermediate (WTI) crude futures were previously up three cents at $83.91 in trade. Coming to domestic prices, crude oil futures last traded 0.03 per cent higher at ₹7,026 per barrel on the multi-commodity exchange (MCX).

In the previous session, Brent crude futures had gained 1.3 per cent to settle at $87.34 per barrel -- its highest close since April 30, 2024. Also, the US WTI had settled at an 11-week high of $83.88, according to news agency Reuters.

Also Read: Oil near two-month high on Hurricane Beryl forecast, low US crude inventories; Brent at $86
 

What's pushing crude oil prices?

-Analysts said that oil prices had dropped by as much as 83 cents earlier, but the dip was expected not to last given dollar weakness and a brighter outlook for US fuel demand after the EIA data. German industrial orders fell unexpectedly in May, fueling worries that a recovery for Europe's largest economy remains elusive.

-Demand concerns were heightened by US data on Wednesday showing that first-time applications for US unemployment benefits increased last week while jobless numbers also rose. Countering that, weaker economic data could hasten the US Federal Reserve's interest rate cuts, which could support oil markets.

Also Read: Federal Reserve minutes: Waning inflation, job market slump indicate rate cut ahead

-Softer US data has prompted markets to raise the probability of a September rate cut to 74 per cent from 65 per cent. Russia's oil producers Rosneft and Lukoil will sharply cut oil exports from the Black Sea port of Novorossiisk in July, according to Reuters. Also, Saudi Arabia's Aramco cut the price for the flagship Arab light crude it will sell to Asia in August to $1.80 per barrel above the Oman/Dubai average.

-The potential price reduction for Asia, which accounts for about 80 per cent of Saudi's oil exports, underscores the pressure faced by the Organisation of Petroleum Countries (OPEC) as non-OPEC supply continues to grow while the global economy faces headwinds. Swiss bank UBS expects Brent crude to reach $90 per barrel this quarter, citing OPEC production cuts and projected declines in oil inventories.
 

Where are oil prices headed?

Analysts noted that crude oil prices recovered from their lows amid profit-taking in the dollar index as the index fell sharply after dovish comments from the US Fed Chair, which supported oil prices. Downbeat US economic data and record weakness in the Japanese Yen limit the gains. Easing fears of Hurricane Beryl could reduce the risk premium of crude oil in the upcoming sessions.

‘’We expect crude oil prices to remain volatile in sessions. Crude oil has support at $82.30-$81.70 and resistance at $83.60-$84.20. In INR, crude oil has support at ₹6,870-6,810 and resistance at ₹7,040-7,110,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
 

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