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Investing.com– Oil prices drifted lower Thursday, hit by a degree of profit-taking, but remained near recent highs benefiting from a weaker dollar, while the prospect of tighter supplies continued to offer support.
By 08:35 ET (12.35 GMT), the futures traded 0.2% lower at $81.14 a barrel and the contract dropped 0.1% to $85.85 a barrel.
“The rally in oil has started to fade with the market in overbought territory and little in the way of a fresh catalyst to keep the upward momentum going,” said analysts at ING, in a note.
However, both contracts remained in sight of over four-month highs hit earlier in the week.
Fed talks rate cuts, U.S. economic strength
The dollar has bounced slightly Thursday, weighing slightly on the crude market, but it slid 0.6% from a two-week high after Fed Chair said that the U.S. central bank was still considering cutting interest rates by three quarters of a percentage point this year.
While Powell flagged some concerns over sticky inflation, he also noted that the U.S. economy remained resilient. The Fed upgraded its quarterly economic projections and now expects the economy to grow 2.1% in 2024, up substantially from the prior forecast of 1.4%.
The surprised on the upside Thursday, and lower interest rates as well as strength in the U.S. economy bode well for demand in the world’s biggest fuel consumer, which is expected to improve during the spring season.
Supply outlook remains tight, US inventories shrink
Expectations of tighter oil supplies, which were a key driver of crude gains in the past two weeks, remained largely in play. Official U.S. data showed on Wednesday that crude oil inventories shrank more than expected in the week to March 15.
The draw was driven by increased refinery activity and higher oil exports.
A bigger-than-expected draw in also signaled that fuel demand was picking up from a winter lull.
Shrinking U.S. inventories, coupled with more potential supply shocks from geopolitical disruptions in Russia and the Middle East, presented a tighter outlook for global crude markets in 2024.
Top producers in the Organization of Petroleum Exporting Countries were also seen cutting exports in March.
(Ambar Warrick contributed to this article.)
