Oil steadied on Thursday after a two-day decline as strike-disrupted fuel supply in France, a drop in U.S. crude inventories and a weaker dollar offset fears over the economic impact of rising interest rates.
TotalEnergies was unable to make deliveries from its French refineries on Thursday because of continued strike action a day after data showing an unexpected decline in U.S. crude inventories last week.
The halt in deliveries from those refineries and slight weakness in the dollar might attract some short-covering, Tamas Varga of oil broker PVM told Reuters, adding that any gains are likely to be capped by the prospect of higher interest rates.
U.S. West Texas Intermediate (WTI) crude added $1.07, or 1.40% to $77.52.
Brent crude rose $1.17, or 1.42 to $83.59 a barrel. Both benchmarks fell by between 4% and 5% over the previous two days.“We’re broadly seeing oil prices steady,” said Craig Erlam of brokerage OANDA. “As things stand, more rate hikes mean less chance of a soft landing and therefore lower crude demand.”
U.S. Federal Reserve Chair Jerome Powell’s comments this week on the likelihood that interest rates will need to be raised more than previously expected in response to recent strong data continued to weigh on the market.
Oil had registered its largest daily fall since early January after Powell’s comments on Tuesday.
Still, in the second day of his testimony on Wednesday, Powell struck a cautious note, saying debate on the scale and path of future rate increases was ongoing and would depend on data, prompting a pause in the dollar’s rally.
A weaker dollar makes oil cheaper for buyers holding other currencies and tends to support risk appetite among investors.
Crude has also drawn support from expectations of rising Chinese demand.
While China’s crude oil imports in the first two months of 2023 fell 1.3% year on year, analysts pointed to accelerating imports in February as a sign that fuel demand was rebounding after Beijing scrapped COVID-19 controls.