Oil extended its gains after a sharp drop in U.S. crude inventories as the prospect of a slower pace of interest rate hikes from the Federal Reserve filtered through markets, boosting commodities .
West Texas Intermediate futures climbed toward $99 a barrel after closing 2.4% higher in the previous session. U.S. crude inventories fell the most since late May, while exports hit a record high, government data showed. The gap between WTI and global benchmark Brent widened this week as a reduction in Russian flows heightens market tensions in Europe.
As the Fed raised interest rates by 75 basis points for a second month to combat soaring inflation, Chairman Jerome Powell said the pace of increases would slow at some point. Oil has been swept up recently as investors weighed concerns about an economic slowdown against signs of market tightening.
Futures contracts are up about 30% this year despite volatile trading periods characterized by high swings and low liquidity. The supermajors report their second-quarter results this week and are expected to post bumper profits after soaring energy prices. Shell Plc reported record earnings on Thursday.
“Powell’s comments eased some inflation concerns, improving overall appetite for risky assets, including oil,” said Will Sungchil Yun, Seoul-based senior commodities analyst at VI Investment Corp. “Crude will likely continue to trade around $100 a barrel.”
A weaker dollar also helped bolster broader commodity markets. The Bloomberg Dollar Spot Index slipped for a second session to the lowest level since July 5, making commodities denominated in the currency more attractive to investors.
U.S. crude inventories fell 4.52 million barrels last week, while exports hit a record 4.55 million barrels per day, according to the Energy Information Administration. Gasoline inventories fell by 3.3 million barrels.
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