© Reuters.
Investing.com– Oil prices rose in Asian trade on Thursday, benefiting from a weaker dollar as the Federal Reserve flagged three interest rate cuts in 2024, while the prospect of tighter supplies continued to buoy crude.
The fell sharply after Federal Reserve Chair Jerome Powell’s address on Wednesday, aiding commodity prices. Powell also flagged strength in the U.S. economy, which presents a positive scenario for oil demand.
expiring in May rose 0.5% to $86.41 a barrel, while rose 0.5% to $81.15 a barrel by 21:47 ET (01:47 GMT). Both contracts remained in sight of over four-month highs hit earlier in the week.
Fed talks rate cuts, U.S. economic strength
Crude’s biggest point of support on Thursday was a drop in the dollar. The dollar index slid 0.6% from a two-week high after Powell said that the Fed was still considering cutting interest rates by three quarters of a percentage point this year.
While Powell flagged some concerns over sticky inflation, he also noted that the U.S. economy remained resilient. The Fed upgraded its quarterly economic projections and now expects the economy to grow 2.1% in 2024, up substantially from the prior forecast of 1.4%.
Lower interest rates and strength in the U.S. economy bode well for demand in the world’s biggest fuel consumer, which is expected to improve during the spring season.
Supply outlook remains tight, US inventories shrink
Expectations of tighter oil supplies, which were a key driver of crude gains in the past two weeks, remained largely in play. Official U.S. data showed on Wednesday that crude oil inventories shrank more than expected in the week to March 15.
The draw was driven by increased refinery activity and higher oil exports.
A bigger-than-expected draw in also signaled that fuel demand was picking up from a winter lull.
Shrinking U.S. inventories, coupled with more potential supply shocks from geopolitical disruptions in Russia and the Middle East, presented a tighter outlook for global crude markets in 2024.
Top producers in the Organization of Petroleum Exporting Countries were also seen cutting exports in March.
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