West Texas Intermediate (WTI), the benchmark for US crude oil, is hovering around $71.60 on Thursday, showing modest gains. This follows a report from the American Petroleum Institute (API), which revealed a continued decline in US crude stockpiles.
The drop in US crude inventories last week provides some support for WTI. According to the API’s weekly report, crude oil stockpiles fell by 1.442 million barrels for the week ending December 27. This follows a larger decline of 3.2 million barrels the previous week. Market analysts had expected a decrease of 3.0 million barrels.
In addition to the inventory draw, rising geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict could push WTI prices higher in the short term.
However, concerns about US interest rate policy could limit the potential for further price gains. The Federal Reserve is expected to slow its rate cuts in 2025, with officials signaling just two more cuts. This could support the US dollar, which in turn pressures the price of dollar-denominated oil. A stronger dollar makes oil more expensive in other countries, potentially reducing demand.
Additionally, recent data shows that China’s factory activity slowed in December, coming in weaker than expected. This raises concerns about a slowing economic recovery and weaker demand in the world’s second-largest economy, which could weigh on WTI prices.
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