OPEC Demand Forecast Boosts Bullish Sentiment in Oil Markets

Source The Ghana Report

Oil prices are sharply higher as we end the week, driven by an optimistic demand forecast from OPEC and signs of easing U.S. labor market and inflation pressures.

These factors have bolstered expectations for potential Federal Reserve rate cuts despite recent cautious statements from Fed officials. Consequently, oil prices have posted a near 3% weekly gain.

US Economic Indicators and Federal Reserve Actions

The U.S. Labor Department reported a 0.2% drop in the Producer Price Index (PPI) for final demand in May, contrary to the expected 0.1% increase. Additionally, weekly initial jobless claims hit a 10-month high. On Wednesday, the Federal Reserve kept interest rates steady, delaying potential rate cuts until at least December. Fed Chair Jerome Powell noted that inflation had decreased without severely impacting the economy, but higher borrowing costs could still suppress oil demand by dampening economic growth.

EIA Reports Increased Crude Inventories

The Energy Information Administration (EIA) revealed a significant rise in U.S. crude inventories, up by 3.7 million barrels for the week ending June 7, far exceeding the anticipated 1.55 million barrel decline. Fuel inventories also saw substantial increases, heightening concerns about excess supply. Additionally, the EIA revised its forecast for 2024 oil demand growth downward by 100,000 barrels per day.

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