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Oil Prices Hold Steady, Poised for Modest Weekly Gains Amid Optimism on Demand

Oil prices exhibited minimal movement in Asian trading on Friday but were on track for a mildly positive week, buoyed by a softer dollar, diminishing U.S. inventories, and heightened expectations of increased Chinese stimulus stimulating hopes for improved demand.

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However, crude markets faced a barrage of mixed signals throughout the week, with a major industry body revising down its demand forecast for the year. Lingering economic uncertainty in China, the world’s top importer, added to the volatility in oil markets, particularly following the imposition of higher trade tariffs by the U.S.

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Brent oil futures expiring in July edged up by 0.1% to reach $83.33 a barrel, while West Texas Intermediate crude futures stabilized around $78.80 a barrel by 20:55 ET (00:55 GMT).

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Oil prices poised for a mildly positive week following softer CPI and shrinking inventories

Brent and WTI futures recorded gains between 0.7% and 1.4% over the week, with a significant portion of the uptick occurring on Thursday after U.S. consumer inflation readings came in softer than anticipated.

The weaker-than-expected data weakened the dollar and heightened speculation that the Federal Reserve might commence rate reductions as early as September. Looser monetary conditions typically bode well for crude demand. However, this sentiment was somewhat tempered by warnings from several Fed officials, who emphasized the need for more convincing evidence of declining inflation before considering rate cuts.

Mixed signals on demand in oil markets

Crude markets contended with mixed signals on demand throughout the week. While a larger-than-anticipated drawdown in U.S. inventories bolstered optimism regarding improving demand ahead of the travel-intensive summer season, this optimism was offset by the International Energy Agency’s slight downward revision of its annual demand forecast. The adjustment was attributed to uncertainty surrounding the global economy, sticky inflation, and the potential persistence of elevated interest rates.

Conversely, the Organization of Petroleum Exporting Countries (OPEC) maintained its demand forecast for 2024, citing the anticipated economic recovery in China and the possibility of lower interest rates later in the year. Additionally, OPEC is expected to sustain its current pace of production cuts beyond the end of June, thereby presenting a tighter outlook for supply.

Anticipated developments in China

China announced plans to initiate a massive $1 trillion bond issuance this week, marking Beijing’s initial major fiscal stimulus endeavor aimed at bolstering a sluggish economic rebound. Investors await industrial production and retail sales data later on Friday for further insights into the performance of the world’s largest oil importer.

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