WTI Crude Oil gains a second day on favorable demand and supply factors

Key points

Futures on US West Texas Intermediate Crude Oil gained for a second straight day on Wednesday, supported by expectations that the Fed is likely approaching the end of its rate-hiking campaign and by prospects of China economic growth support.

An announcement by China’s top economic planner this week suggested urgency to reinvigorate domestic demand, which could also benefit Oil.

Jin Xiandong of China’s National Development and Reform Commission said on Tuesday that the NDRC would “promptly formulate and roll out policies to restore and expand consumption”, as consumers’ purchasing power was still weak.

In terms of macro data, US retail sales grew at a lesser rate than anticipated in June, which added to the case for the Federal Reserve to end its tightening cycle after delivering an almost certain 25 basis point hike next week.

Other data released recently showed cooling inflation in Canada and the UK, while also contributing to the overall positive market mood.

“Traders have started to become a lot more optimistic as inflation eases off…any improvement in the inflation data also means an improvement in oil demand,” Naeem Aslam, chief investment officer at Zaye Capital Markets, was quoted as saying by Reuters.

Oil prices were also underpinned by supply side factors.

Russia is on course to cut its oil exports by 2.1 million metric tons during the third quarter, according to the country’s energy ministry.

The latest data by the American Petroleum Institute showed crude oil inventories had decreased by 0.797 million barrels during the week ending July 14th, after a 3.026 million barrel build in the prior week. Analysts on average had expected a larger drop – by 2.250 million barrels.

The official government inventory data will be released later today.

As of 12:43 GMT on Wednesday WTI Crude Oil Futures for September delivery were gaining 0.57% to trade at $76.09 per barrel.

At the same time, Brent Oil Futures for September delivery were gaining 0.70% on the day to trade at $80.19 per barrel.