Oil prices edged higher on Thursday after global benchmark Brent crude fell to its largest one-day loss in seven weeks on the previous day, as traders reconsidered the outlook for supply and demand.
Brent crude futures gained 0.9% to $81.31 per barrel, while the US West Texas Intermediate crude futures added 0.9% to $74.64 per barrel.
Analysts said oil prices received a boost as energy market players assessed the possibility of China’s improving demand against subdued consumption in the US and other advanced economies.
Reassessing Oil Supply, Demand Outlook
The two benchmarks were down over $2 in the prior session due to huge expectations for the Federal Reserve to be more aggressive with interest rate hikes.
Minutes of the central bank’s last meeting on Wednesday showed that most Fed policymakers continue to see the risks of rising inflation as a crucial factor determining monetary policy, expressing their support for more interest rate increases until higher prices are kept in check.
The officials also pointed out that a move to smaller hikes would allow them to adjust more closely to upcoming data.
Pushing oil prices up was also Russia’s plan to reduce its oil exports from its western ports by up to 25% in March, which is above its 500,000 barrels per day (bpd) output cut.
Oil also became slightly cheaper for traders holding other currencies after the US dollar index lost 0.1% to $104.39 against its peers on Thursday.
However, the rise in oil prices was curbed due to signs of crude inventories surging further. Citing data from the American Petroleum Institute, market sources said US crude oil and fuel stocks rose by 9.9 million barrels last week.
Traders have been concerned about demand as US oil inventories have posted weekly increases since mid-December.
According to analysts, while a potentially higher greenback continues to be a near-term headwind for crude, they expect Russia’s lower production and China’s economic resumption to squeeze the oil market and strengthen prices.