Oil prices held steady on Thursday as optimism over a larger-than-expected decline in U.S. inventories was offset by caution ahead of key economic data that could influence interest rate decisions.
The strength of the U.S. dollar also put pressure on crude prices, as traders remained largely biased towards the greenback pending further cues on interest rates and inflation.
Brent oil futures for July delivery held steady at $83.61 per barrel, while West Texas Intermediate (WTI) crude futures rose slightly to $79.29 per barrel as of 21:05 ET (01:05 GMT).
Read more: Oil prices climb on demand optimism, OPEC+ cuts eyed
Significant drawdown in U.S. inventories
Data from the American Petroleum Institute showed that U.S. oil inventories shrank by nearly 6.5 million barrels (mb) in the week to May 24, significantly more than the expected draw of 1.9 mb. Gasoline and distillate inventories also saw declines, though the drop in gasoline stockpiles was minimal.
This substantial drawdown typically signals a similar reading from the official government inventory data, which is due for release later on Thursday. The outsized decline suggests that U.S. fuel demand is picking up ahead of the summer travel season, which is usually marked by the Memorial Day holiday.
Focus on U.S. economic data
Attention on Thursday was squarely on the revised reading of first-quarter U.S. gross domestic product (GDP), which is expected to demonstrate some resilience in the world’s largest economy.
While strength in the economy offers positive cues for oil demand, it also provides the Federal Reserve with more room to maintain higher interest rates for an extended period – a trend that is expected to eventually weigh on demand.
Concerns over high U.S. interest rates have been a key factor pressuring oil prices in recent sessions, as several Fed officials have warned that the central bank needs more confidence that inflation is easing before it can begin trimming rates.
PCE inflation data eyed
To this end, the personal consumption expenditures (PCE) price index data – the Fed’s preferred inflation gauge – is scheduled for release on Friday and is likely to factor into the central bank’s outlook on interest rates.
Beyond the Fed and interest rates, oil markets are also awaiting the upcoming meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+) on June 2. The group is widely expected to maintain its current production cut pace beyond the end-June deadline.
Additionally, purchasing managers’ index data from China, the world’s largest oil importer, is due on Friday and is set to provide further economic cues on the country.
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