LONDON: Oil rose on Wednesday, supported by potential supply disruption after Ukrainian attacks on Russian refineries, signs of strong demand and hopes that the Federal Reserve might start cutting interest rates soon despite somewhat sticky U.S. inflation.
Ukraine launched a sweeping drone attack on Russian regions on Wednesday, causing a fire at Rosneft’s biggest oil refinery in what President Vladimir Putin said was an attempt to disrupt Russia’s presidential election.
“The sudden but understandable brightening of (oil price) sentiment has been triggered by the continuous strikes on Russian refiners,” said Tamas Varga of oil broker PVM.
Brent crude futures for May rose $1.06, or 1.3%, to $82.98 a barrel by 1104 GMT. U.S. West Texas Intermediate crude for April gained $1.15, or 1.5%, to $78.71.
Despite the rally, Brent has traded in a narrow range above $80 for more than a month, briefly rising above $84 in that time.
Oil prices rise slightly as OPEC retains demand forecasts
Also adding support, Varga said, was Tuesday’s supply report from the American Petroleum Institute.
In an indication of healthy demand, U.S. crude oil and fuel inventories fell last week according to sources citing the API report ahead of Wednesday’s official U.S. inventory figures.
In an earlier sign of strong demand, the Organization of the Petroleum Exporting Countries on Tuesday stuck to its forecast for oil demand growth of 2.25 million barrels per day (bpd) in 2024, higher than many other forecasts.
The International Energy Agency, which expects demand growth to be much lower, updates its forecasts on Thursday.
Oil and the wider financial markets also found support from sentiment that slightly hotter than expected U.S. inflation will not derail interest rate cuts by the middle of the year. Lower rates support oil demand.
“The risk environment has largely stayed unfazed, riding on the firm belief that current market pricing for a rate cut only in June will do the job,” said IG market strategist Yeap Jun Rong.
In a note to clients, Capital Economics analysts said they still forecast the Fed to start easing policy “around June”.