London (awp/afp) – Oil prices remained in the green on Friday, pushed by the drop in stocks in the United States and economic data which argues in favor of a reduction in Fed rates, but also by the premium geopolitical risk still present.
Around 09:25 GMT (11:25 CET), the price of a barrel of Brent from the North Sea for delivery in July increased 0.35% to 84.17 dollars.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in June, gained 0.42% to $79.59.
The two global crude oil benchmarks strengthened over the week with the decline in commercial oil reserves in the United States and hopes of future rate cuts.
“The substantial reduction in commercial crude stocks, especially compared to the usual seasonal increase, emerged as a key driver of the price,” comments Ole Hvalbye, analyst at Seb.
Usually, stocks tend to increase before the driving season in the United States, the nickname given to the summer period marked by many car trips and which begins at the end of May.
However, during the week ended May 3, American commercial oil reserves decreased by 1.4 million barrels after having increased by 7.3 million barrels the previous week, according to the EIA press release published Wednesday.
Ole Hvalbye also attributes the rise in crude prices “to a renewed optimism regarding rate cuts in the United States” due to a stronger than expected increase in the number of new applications for unemployment benefits. Enough to wait for “potential rate cuts from the Federal Reserve (Fed) this year”.
Lower interest rates are favorable for oil purchases while a high interest rate environment tends to dampen economic growth, and therefore demand for crude.
Rate cuts also tend to weigh on the greenback. And since black gold prices are denominated in dollars, a depreciation of the American currency also pushes the demand for oil on the markets by increasing the purchasing power of investors using foreign currencies.
DNB analysts also note a certain return of the geopolitical risk premium in crude prices with “a new Ukrainian attack on a Russian refinery” and “Israel which rejects the ceasefire and continues its operations in Rafah”.
Ukraine claimed responsibility on Thursday for a strike against a Russian refinery in the Bashkortostan region, a record distance of 1,200 kilometers from its border, an attack which, according to local authorities, did not cause any casualties.
In the Middle East, Israel increased strikes in the Gaza Strip on Friday after the departure, without agreement, of the two camps from the negotiating table aimed at achieving a truce and preventing an Israeli offensive on Rafah.
emb/ved/ktr
