Crude Oil News Today: Strong US Demand, Geopolitical Tensions Boost Prices

U.S. Demand and Inflation Data Drive Market Sentiment

Oil prices are climbing higher on Thursday, building on the previous session’s gains, as recent U.S. economic data suggests stronger demand. The latest figures indicate slower inflation than anticipated, bolstering arguments for potential interest rate cuts by the Federal Reserve. Such cuts are likely to drive higher consumption, supporting oil prices.

At 09:50 GMT, Light Crude Oil Futures are trading $78.66, up $0.03 or +0.04%.

Impact of U.S. Inflation and Retail Sales

The U.S. consumer price index for April rose less than expected, reinforcing market expectations for a rate cut in September. Additionally, a significant drop in U.S. retail sales suggests more room for policy easing. A rate cut could weaken the dollar, making oil more affordable for holders of other currencies, thereby potentially increasing demand.

EIA Data Shows Inventory Drawdowns

Data from the Energy Information Administration (EIA) revealed a larger-than-expected drawdown in U.S. crude inventories. Crude stocks fell by 2.5 million barrels to 457 million barrels in the week ending May 10, significantly surpassing analysts’ expectations of a 543,000-barrel decrease. This reduction reflects increased refining activity and rising fuel demand.

Geopolitical Risks in the Middle East

Geopolitical tensions in the Middle East are adding a risk premium to oil prices. Israeli military operations against Hamas in Gaza continue to escalate, with ceasefire talks mediated by Qatar and Egypt currently at a stalemate. Such conflicts tend to heighten fears of supply disruptions, supporting higher oil prices.

IEA’s Adjusted Demand Forecast

Despite the bullish factors, gains are somewhat constrained by the International Energy Agency (IEA) trimming its forecast for 2024 oil demand growth. The IEA now projects global oil demand to grow by 1.1 million barrels per day, down 140,000 barrels from its previous forecast. This revision primarily reflects weaker demand in developed OECD nations.

Market Forecast: Bullish Outlook

Considering the supportive data from the U.S., ongoing geopolitical risks, and despite the IEA’s revised forecast, the short-term outlook for oil prices remains bullish. Stronger demand signals from the U.S. and potential supply disruptions from geopolitical tensions are likely to keep prices elevated. Traders should monitor further developments in U.S. economic policies and Middle Eastern geopolitics closely.

Technical Analysis

Light crude oil futures are consolidating on Thursday for the 10th straight session, suggesting buyers may have found their sweet spot around the 200-day moving average. The market is currently straddling this long-term trend indicator at $78.67.

Trader reaction to $78.67 will set the tone for the session. A sustained move over this level will suggest the presence of buyers. Taking out $79.96 will change the short-term trend to up. This could trigger a surge into the 50-day moving average at $81.39.

A sustained move under $78.67 will be a sign of weaknes with the short-term bottom at $76.70 a potential trigger point for an acceleration to the downside.