Oil Rises to $78.19 as US Stockpiles Drop by 2.4 Million Barrels

US crude inventories drop by 2.4 million barrels, pushing WTI above $78 and Brent to $81.92 per barrel.

By Bill Bullington

6/11, 20:13 EDT
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Key Takeaway

  • WTI crude rose to $78.19 a barrel and Brent closed at $81.92, driven by a 2.4 million barrel drop in US stockpiles.
  • Oil prices rebounded this week after OPEC+ announced plans to return supply, with demand expected to strengthen in H2 2024.
  • Investors await the IEA's market outlook report and the Federal Reserve's interest-rate decision for further direction.

Oil Prices Rebound

Oil prices have seen a notable rebound this week, driven by a combination of shrinking US crude stockpiles and optimistic demand forecasts. West Texas Intermediate (WTI) rose above $78 a barrel, marking a 0.4% increase to $78.19 a barrel as of early Wednesday in Singapore. Brent crude also saw gains, closing 0.4% higher at $81.92 a barrel on Tuesday. The American Petroleum Institute reported a significant drop in US crude inventories by 2.4 million barrels last week, which has contributed to the upward momentum in oil prices.

Demand Forecasts and Market Sentiment

The Organization of the Petroleum Exporting Countries (OPEC) maintained its forecast for strong demand in the second half of 2024, which has further bolstered market sentiment. The International Energy Agency (IEA) is set to release its supply and demand outlook later today, which will be closely watched by traders. The US Energy Information Administration (EIA) has also raised its global oil demand growth forecast for 2024 to 1.10 million barrels per day, up from a previous estimate of 900,000 barrels per day. This optimistic outlook has helped alleviate fears of oversupply that had previously weighed on the market.

Tim Evans, an independent energy analyst, noted, "We’re now at least considering the idea that maybe demand will pick up in the second half, and the market may actually need some additional OPEC+ supply." This sentiment reflects a shift in market dynamics, where traders are now more optimistic about future demand.

Federal Reserve and Economic Indicators

Traders are also keeping a close eye on the Federal Reserve's upcoming interest-rate decision, which is expected to influence market dynamics. A robust US economy and persistent inflation have led investors to scale back expectations of a near-term pivot by the Fed. Yeap Jun Rong, a market strategist with IG Asia Pte, commented, "Market participants are hoping to tap on some optimism around upcoming summer demand," indicating that traders are looking beyond the Fed's "higher-for-longer" rate narrative.

The World Bank has revised its 2024 global growth outlook slightly upward, citing stronger-than-expected performance from the US economy. However, it warned that overall output would remain below pre-pandemic levels through 2026. This mixed economic backdrop adds another layer of complexity to the oil market's outlook.