Oil prices steadied in Asian trade on Thursday as optimism over a bigger-than-expected draw in U.S. inventories was offset by caution ahead of key economic data that is likely to factor into interest rates.
Strength in the dollar also pressured crude, as traders remained largely biased towards the greenback before more cues on interest rates and inflation.
Brent oil futures expiring in July steadied at $83.61 a barrel, while West Texas Intermediate crude futures rose slightly to $79.29 a barrel by 21:05 ET (01:05 GMT).
US inventories shrink much more than expected- API
Data from the American Petroleum Institute showed on Wednesday that U.S. oil inventories shrank nearly 6.5 million barrels (mb) in the week to May 24, much more than expectations for a draw of 1.9 mb.
Gasoline and distillate inventories also saw draws, although the draw in gasoline stockpiles was minimal.
The data usually heralds a similar reading from official inventory data, which is due later on Thursday. But the outsized draw suggested that U.S. fuel demand was picking up with the onset of the travel-heavy summer season, which is usually marked by the Memorial Day weekend.
US GDP, inflation data awaited
Focus on Thursday was squarely on a revised reading on first quarter U.S. gross domestic product, which is expected to show some resilience in the world’s biggest economy.
While strength in the economy offers some positive cues on oil demand, it also gives the Federal Reserve more headroom to keep rates high for longer- a trend that is expected to eventually eat into demand.
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Concerns over high U.S. interest rates have been a key weight on oil prices in recent sessions, as several Fed officials also warned that the bank needed more confidence inflation was easing before it could begin trimming rates.
To this end, PCE price index data- which is the Fed’s preferred inflation gauge- is due on Friday, and is likely to factor into the central bank’s outlook on interest rates.
Beyond the Fed and interest rates, oil markets were also awaiting a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+), which is set to take place virtually on June 2. The cartel is widely expected to maintain its current pace of production cuts past an end-June deadline.
Purchasing managers index data from China, the world’s biggest oil importer, is also due on Friday, and is set to offer more economic cues on the country.
