Oil inches up on US demand strength; fading Middle East supply risks offset gains

Oil prices edged higher on Thursday as crude inventories in the United States fell on higher demand as summer driving season ramped up, while concerns over Middle East supply risks eased, offsetting some gains.

Brent crude futures settled 5 cents, or 0.07 per cent, higher to US$67.73 a barrel. US West Texas Intermediate crude gained 32 cents, or 0.49 per cent, to US$65.24 a barrel.

Both benchmarks climbed nearly 1 per cent on Wednesday, recovering from losses earlier in the week after data showed resilient US demand. Brent futures were trading below their close of US$69.36 on June 12, the day before Israel started airstrikes on Iran.

The US driving season had started slowly but was now stoking demand, ANZ analysts said. “The market is starting to digest the fact that crude oil inventories are very tight all of a sudden,” said Phil Flynn, senior analyst with the Price Futures Group.

US crude oil and fuel inventories fell in the week to June 20 as refining activity and demand rose, the Energy Information Administration said on Wednesday.

Crude inventories fell by 5.8 million barrels, the EIA said, exceeding analysts’ expectations in a Reuters poll for a 797,000-barrel draw.

Also supporting oil prices, the dollar index, which measures the greenback against a basket of currencies, sank to a three-year low as a report that President Donald Trump was planning to choose the next Federal Reserve chief early fuelled fresh bets on US rate cuts.

A weaker dollar makes oil less expensive for holders of other currencies, increasing demand.

However, signs of easing Middle East supply risks offset some gains.