Investing.com-- Oil prices rose in Asian trade on Wednesday, buoyed by industry data showing a bigger-than-expected draw in U.S. stockpiles, while soft inflation data also fueled hopes of deeper interest rate cuts.
Sentiment towards oil markets was also on edge as traders awaited a retaliatory strike by Iran against Israel, which could happend as soon as this week and is expected to ramp up geopolitical tensions in the Middle East.
Brent oil futures expiring in October rose 0.5% to $81.09 a barrel, while West Texas Intermediate crude futures rose 0.5% to $77.21 a barrel by 20:58 ET (00:58 GMT).
US inventories shrink more than expected- API
Data from the American Petroleum Institute showed U.S. oil inventories shrank by 5.2 million barrels in the week to August 10, much more than expectations for a draw of 2 million barrels.
Gasoline inventories contracted, while distillate inventories saw a mild build.
The reading, which usually heralds a similar reading from official inventory data, showed that demand remained robust in the world’s biggest fuel consumer, even as the travel-heavy summer season wound down.
The reading helped oil bulls look past a recent cut in the Organization of Petroleum Exporting Countries’ outlook for demand growth in 2024, and also helped soothe concerns that slowing U.S. economic growth will damage demand.
The International Energy Agency also trimmed its 2024 oil demand forecast this week.
Rate cut bets build with CPI data on tap
On the U.S. economic front, softer than expected producer price index data on Tuesday ramped up hopes that inflation was cooling, and that the Federal Reserve will have more impetus to cut interest rates.
The reading came just ahead of consumer price index inflation data, which is due later on Wednesday, and is also expected to show inflation eased in July, albeit slightly.
The prospect of interest rate cuts presents a brighter outlook for the U.S. economy, especially amid recent concerns that slowing growth will require more rate cuts from the Fed.
Traders gravitated slightly more towards a 50 basis point cut in September over a 25 bps cut after Tuesday’s data, according to CME Fedwatch.
Beyond the inflation data, industrial production and retail sales readings from the U.S. and China are also on tap this week.