Oil extended gains after a big draw in US crude inventories, while the prospect of a slower pace of interest-rate hikes from the Federal Reserve filtered through markets, buoying commodities.
West Texas Intermediate futures climbed to about $99 a barrel after closing 2.4% higher in the previous session. US crude stockpiles dropped by the most since the end of May, while exports rose to a record, according to government data. Shell Plc’s chief said that oil prices are more likely to rise than fall as tightness in supply outweighs any risks to demand.
While the Fed raised interest rates by 75 basis points for a second month to combat surging inflation, Chair Jerome Powell said the pace of hikes would slow at some point. Oil has been whipsawed recently as investors weighed concerns over an economic slowdown against signs of tightening markets.
Futures are up more than 30% this year despite periods of volatile trading characterized by sharp swings and low liquidity. The price surge helped Shell Plc and TotalEnergies SE to record second-quarter earnings, and other supermajors are likely to follow.
A weaker dollar has also helped boost commodity prices. The Bloomberg Dollar Spot Index slipped for a second session, falling to the lowest level since July 5, making commodities priced in the currency more attractive to investors.
“Both financial market factors and fundamentals are helping oil today,” said Giovanni Staunovo, an analyst at UBS AG in Zurich. “On the one side there’s the Fed and the weaker dollar, while on the other we have supportive inventory data and diminishing concerns over demand.”
Prices
- WTI for September delivery rose 1.7% to $98.90 a barrel at 9:09 a.m. in New York.
- Brent for the same month gained 1.5% to $108.21
US crude stockpiles fell by 4.52 million barrels last week, while exports rose to a record 4.55 million barrels a day, according to the Energy Information Administration. Gasoline inventories declined by 3.3 million barrels.
“Where we are today, there is more upside than downside when it comes to the oil price,” Shell Chief Executive Officer Ben van Beurden said in an interview with Bloomberg TV. “Demand hasn’t fully recovered yet and supply is definitely tight.”
Meanwhile, the spread between WTI and global benchmark Brent has widened this week as a reduction in Russian flows exacerbates market tightness in Europe.
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