Futures on US West Texas Intermediate Crude Oil extended gains from the prior trading day on Thursday amid improved investor risk sentiment and following a large drop in US crude oil stocks last week.
“Risk sentiment has recovered from recession fears due to the ongoing U.S. earnings optimism and less aggressive Fed rhetoric on rate hikes, which supported a rally in the crude market,” CMC Markets analyst Tina Teng was quoted as saying by Reuters.
A weaker US Dollar also supported dollar-priced oil, as it makes the commodity more attractive for international investors holding other currencies.
Yesterday the Federal Reserve raised the target range for the federal funds rate by 0.75%, in line with market consensus, to curb high inflation, while the US Dollar weakened on hopes of a less aggressive rate hiking path.
Meanwhile, the official report by the US Energy Information Administration (EIA) showed on Wednesday crude oil inventories had decreased by 4.523 million barrels during the week ended July 22nd – the biggest drop since late May. Analysts on average had anticipated a much smaller inventory decrease – by 1.037 million barrels.
The market was also supported by news the Group of Seven richest economies intends to put a price-capping mechanism on Russian oil exports in place by December 5th.
Russian gas supply through Nord Stream 1 to Europe has been reduced to only 20% of capacity and some analysts believe it could trigger a switch from gas to crude oil and support oil prices in the near term.
“We increase our total estimates for additional oil demand from gas to oil switching by 700,000 bpd from October 2022 through March 2023,” JP Morgan analysts wrote in an investor note.
“We keep our price forecast unchanged and see global oil price in the low-$100s in 2H22 and high $90s in 2023,” they added.
As of 8:26 GMT on Thursday WTI Crude Oil Futures were gaining 0.56% to trade at $98.64 per barrel. Earlier in the trading session the black liquid went up as high as $99.17 per barrel, which has been its strongest price level since July 21st ($99.95 per barrel).
At the same time, Brent Oil Futures were gaining 0.53% on the day to trade at $107.90 per barrel. Earlier in the trading session Brent Oil went up as high as $108.25 per barrel, which has been its strongest price level since July 5th ($114.71 per barrel).