Oil Stabilizes After Sharp Midweek Jump
Oil prices steadied Thursday after their strongest gain in two weeks. Brent crude hovered near $71 a barrel. West Texas Intermediate (WTI) held below $68. The rally was driven by softening US inflation and promising oil demand signals.
US consumer prices in February rose at the slowest rate in four months. That data helped shift market sentiment toward risk-on assets, including oil. Yet economists warn that the ongoing trade war could still push up prices of essential goods like food and clothing.
Oil Benefits From Risk-On Market Mood
According to Saxo Markets strategist Charu Chanana, oil has recently been a “beneficiary of the risk-on sentiment across markets.” However, she also flagged potential risks that could disrupt this momentum.
Concerns around global economic growth remain. In addition, uncertainty tied to potential new tariffs continues to cloud the demand outlook. These factors leave the broader oil market vulnerable to downside volatility.
Traders Turn Bearish as Supply Outlook Rises
Oil prices have retreated from their January highs. Major oil traders have turned more bearish, citing a widening gap between supply and demand. Attention now shifts to the International Energy Agency’s monthly report, expected later today.
Earlier this week, the US government slashed its forecasts for an oil glut, providing temporary relief to markets. Still, the medium-term outlook remains murky as excess production builds up globally.
OPEC+ Production Surges in February
Production from OPEC and its allies rose sharply last month. Kazakhstan breached its production cap again, as reported by the group’s secretariat. In response, the country announced new agreements with international oil companies to reduce output.
Despite these pledges, excess supply continues to weigh on oil. Traders are closely watching OPEC’s compliance levels as well as production trends in non-OPEC nations.
US Inventory Builds Slower Than Forecasts
In the US, commercial oil inventories increased by 1.4 million barrels last week. This was significantly lower than predictions from industry groups. Meanwhile, stockpiles at Cushing, Oklahoma — the main WTI delivery hub — fell by 1.2 million barrels. That was the site’s first drawdown in five weeks.
Although overall inventories are still rising, the smaller-than-expected build offered some support to oil prices. Any further reduction at key hubs like Cushing could provide a bullish catalyst.
Strengthening Timespreads Signal Tighter Market
Oil timespreads are pointing to a stronger market. The Brent front-month contract now trades at a $1.42 premium over contracts four months ahead. This backwardated structure reflects bullish sentiment and expectations of tightening supplies.
Just a month ago, that spread was only $1.04. The widening gap shows that near-term demand is strengthening, even as macroeconomic risks linger.