Melbourne, Feb 1 (BNA): Oil prices rose on Wednesday amid signs of slowing inflation in the United States, easing fears that the world’s largest oil user could face a recession due to higher interest rates and a weaker dollar supporting some buying interest.
Brent crude futures were up 32 cents, or 0.4 percent, at $85.78 a barrel at 0407 GMT. US West Texas Intermediate crude futures rose 42 cents, or 0.5%, to $79.29 a barrel, Reuters reports.
Both benchmarks rose for a second day, after rising nearly 1% in the previous session.
“Sentiment has shifted amid positive corporate reporting season. Signs of slowing inflation have also fueled expectations that the Fed will be able to pause rate hikes,” ANZ commodities analyst said in a note.
Expectations of a rate hike helped Tamer lower the dollar index, supporting oil prices as a weaker dollar makes the commodity cheaper for buyers holding other currencies.
All eyes will be on Wednesday’s meeting between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, where producers are expected to endorse existing production targets agreed in November.
A Reuters survey found that OPEC oil production fell in January as Iraqi exports fell and Nigeria’s production did not recover, with the 10 OPEC members pumping 920,000 barrels per day less than the organization’s target volumes under the OPEC+ agreement.
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The shortfall was larger than the 780,000 bpd deficit in December.
“Oil prices seem set to go through a period of increased volatility…OPEC+ is likely to stick to its current production targets, however, Russia is leaning towards increasing oil exports to Asian buyers at deep discounts, which could upset the balance in oil markets,” said a market expert. Independent Oil Sugandha Sachdeva.
Sachdeva added that the global growth forecast developed by the International Monetary Fund and the expectation of strong pent-up demand from China amid increased traffic are supporting oil prices.
Separately, data from the American Petroleum Institute industry group showed that crude oil inventories rose by about 6.3 million barrels in the week ending January 27, according to market sources.
This was a larger increase than the 400,000-barrel increase expected by analysts polled by Reuters on average.
Distillate stocks, which include diesel and heating oil, rose by about 1.5 million barrels, contrary to analysts’ expectations of a decrease of 1.3 million barrels.