Oil prices rose from a five-month low thanks to positive demand signals, including a decline in US inventories and signs that the Federal Reserve is preparing to cut interest rates.
West Texas Intermediate crude rose toward $70 a barrel, after rising 1.3% on Wednesday from its lowest level since late June. The price of global benchmark Brent crude was close to $75. US crude oil inventories fell more than twice as much as expected last week, according to the Energy Information Administration.
The Federal Reserve held interest rates steady for the third straight meeting and gave the clearest signal yet that the tightening campaign is over. Bank President Jerome Powell indicated that policymakers are now shifting their focus to when to reduce borrowing costs as inflation continues to slow.
Fed surprise
The dovish outcome from the FOMC meeting was a surprise to some, who had expected the Fed to maintain a hawkish stance, said Yip Jun Rong, market strategist at IG Asia Pte. He stated that this trend raised risk appetite, which oil prices were able to benefit from.
The price of crude oil is still more than a quarter lower than the highest level recorded in late September due to rising exports from non-OPEC countries and fears of worsening demand expectations. In addition, the market is skeptical about whether deeper voluntary production cuts by the Organization of the Petroleum Exporting Countries and its allies will be fully adhered to.
Traders are awaiting the International Energy Agency's monthly report scheduled to be issued later on Thursday, which is the last of three major market forecasts this week.
While APEC is working to reduce its oil production, its latest forecasts indicate a significant shortage in crude supplies in the next quarter.
