Oil prices near 1-mth high on demand hopes; US GDP awaited

Investing.com-- Oil prices rose in Asian trade on Thursday, extending gains to near one-month highs following stimulus measures from top importer China, although anticipation of key U.S. economic readings kept traders on edge.

Prices were also encouraged by a series of strong purchasing managers index readings from the U.S. and UK, which showed an improvement in business activity through early-January, offering positive cues for crude demand.

The recent gains put oil prices close to their highest levels since late-December, with Brent now trading back above $80 a barrel. Oil prices were also trading positive for 2024 after a rough start to the year.

The People’s Bank of China on Wednesday unexpectedly cut reserve requirements for local banks, freeing up more liquidity in another attempt to foster economic growth. The move ramped up hopes over an economic rebound in the world’s largest oil importer, which was grappling with weak growth through 2023.

Data showing a massive drawdown in U.S. oil inventories also aided oil prices, especially as severe cold weather conditions disrupted crude production in the country. But this notion was offset by a sustained build in gasoline inventories, as cold weather also dissuaded travel.

Brent oil futures expiring in March rose 0.3% to $80.30 a barrel, while West Texas Intermediate crude futures rose 0.4% to $75.27 a barrel by 20:03 ET (01:03 GMT).

Both contracts were close to levels last seen in late-December.

U.S. production disruptions added to concerns over tighter supplies in the coming months, especially as a conflict in the Middle East showed little signs of stopping. U.S.-led forces carried out more strikes on the Iran-aligned Houthi group in Yemen, while the Israel-Hamas war raged on.

A softer dollar also aided oil prices, as traders locked-in recent profits in the greenback after it surged to six-week highs. But the dollar steadied on Thursday, in anticipation of several key U.S. economic cues, as well as a Federal Reserve meeting next week.

US Q4 GDP, more interest rate cues awaited

Focus now was largely on fourth-quarter U.S. gross domestic product data, due later on Thursday, for more cues on the world’s largest fuel consumer.

The data is expected to show some cooling in growth, as the effects of high interest rates are baked into the economy.

PCE price index data- the Fed’s preferred inflation gauge, is due on Friday, and is expected to show that inflation remained sticky in December, giving the bank more impetus to keep rates higher for longer.

The readings come just days before the Fed’s first meeting of 2024, where the central bank is widely expected to keep rates at 23-year highs.

Fears of softening demand- amid easing economic growth and high interest rates- were a key point of concern for oil markets through 2023, limiting gains from any supply reductions. This notion is likely to persist, amid waning bets on early interest rate cuts from the Fed.

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