By Nia Williams
(Reuters) – Oil prices hit their highest level since April on Thursday, holding above $87 after data the previous day showed a decline in U.S. inventories.
Brent crude futures were up 21 cents, or 0.2 percent, at $87.55 a barrel by 1922 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 18 cents at $84.06 in a tight market due to the U.S. Independence Day holiday.
In the previous session, Brent gained 1.3% to close at $87.34, its highest close since April 30. WTI, meanwhile, had closed at an 11-week high of $83.88.
The gains followed a bigger-than-expected drop in stocks. The U.S. Energy Information Administration (EIA) reported a draw of 12.2 million barrels in inventories. Analysts polled by Reuters had expected a draw of 680,000 barrels. [EIA/S]
Traders were also following the war in Gaza and elections in France and the UK, said RBN Energy analyst Martin King.
“Trading is quiet and people are watching the physical market and the geopolitical situation,” King said.
Oil prices had earlier fallen as low as 83 cents, but the drop was not expected to last given the weaker dollar and a brighter outlook for U.S. fuel demand after the EIA data, PVM analyst Tamas Varga said.
However, German industrial orders unexpectedly fell in May, adding to signs that a recovery in Europe’s largest economy remains elusive.
Demand concerns intensified on Wednesday with U.S. data showing first-time applications for U.S. unemployment benefits rose last week, while jobless numbers also increased.
On the other hand, analysts said weaker economic data could accelerate interest rate cuts by the US Federal Reserve, which could be favourable for oil markets.
On Thursday, Reuters reported that Russian oil producers Rosneft and Lukoil will sharply reduce oil exports from the Black Sea port of Novorossiisk in July, according to two sources familiar with the cargo plan.
Meanwhile, Saudi Arabia Saudi Aramco (TADAWUL:) cut the price of the flagship Arabian Light crude it will sell to Asia in August to $1.80 a barrel above the Oman/Dubai average.
The potential price cut for Asia, which accounts for about 80% of Saudi Arabia’s oil exports, underscores the pressure facing OPEC producers as non-OPEC supply continues to grow while the global economy faces headwinds.
Swiss bank UBS expects Brent crude to hit $90 a barrel this quarter, it said in a note to clients, citing OPEC+ output cuts and projected declines in oil inventories.