Oil prices saw an upward trend on Wednesday, driven by industry data indicating a decline in U.S. inventories, which heightened expectations of tighter supplies.
However, concerns over forthcoming inflation data tempered gains. Factors such as Federal Reserve Chair Jerome Powell’s positive outlook on the U.S. economy and China’s plans for a massive bond issuance also influenced market sentiment.
The July contract for Brent oil futures experienced a 0.4 percent increase, reaching $82.70 per barrel.
Similarly, West Texas Intermediate (WTI) crude futures rose by 0.4 percent to $77.97 per barrel at 21:06 ET (01:06 GMT).
U.S. inventories decline beyond expectations
The American Petroleum Institute (API) reported that U.S. oil inventories decreased by 3.1 million barrels during the week ending May 10, surpassing expectations of a 1.1 million barrel drawdown.
Additionally, gasoline stockpiles declined, while distillates experienced a 349,000 barrel increase.
The unexpected decline in inventories raised hopes that U.S. fuel demand was rebounding as the summer travel season began, potentially tightening global crude supplies.
Read more: Oil prices surge as China’s fiscal stimulus, Canadian wildfires threaten supply
Wildfires in Canada threaten crude supplies
Devastating wildfires in Canada, particularly in Fort McMurray, a major Canadian oil sands city, forced the evacuation of approximately 6,000 people.
The threat posed by the approaching fire heightened concerns about potential disruptions in crude supplies.
The situation in Canada further contributed to expectations of tighter North American markets.
Inflation jitters and CPI data
The oil market remained apprehensive ahead of the release of key U.S. Consumer Price Index (CPI) data later on Wednesday, especially following the hotter-than-expected Producer Price Index (PPI) data for April.
Traders were cautious about signs of persistently high U.S. inflation, which could prompt the Fed to maintain high interest rates for an extended period. Such a scenario could negatively impact crude prices and potentially slow global economic activity, leading to a decrease in oil demand.
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