Oil prices hold firm, on pace for weekly gain, as inflation appears to ease in U.S.

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  • Oil prices are holding firm, with the benchmarks up about 4% this week, after encouraging inflation reports.
  • Oil analysts are generally expecting the market to tighten through the third quarter before loosening into a surplus in 2025.

Crude oil futures held steady Thursday after the latest round of economic data indicated that inflation is easing in the U.S., potentially opening a path for the Fed to cut interest rates and boost the economy.

Wholesale prices unexpectedly fell in May by 0.2% after rising in April, according to Labor Department data released Thursday. The producer price report came on the back of Wednesday numbers that showed consumer prices were unchanged in May.

Oil prices have gained about 4% this week, recovering from a sell-off last week on an OPEC+ plan to increase production in the fourth quarter. Oil market analysts generally viewed the sell-off as an overreaction.

Here are Thursday's closing energy prices:

  • West Texas Intermediate July contract: $78.62 per barrel, up 12 cents, or 0.15%. Year to date, U.S. crude oil has gained 9.7%.
  • Brent August contract: $82.75 per barrel, up 15 cents, or 0.18%. Year to date, the global benchmark is ahead 7.4%.
  • RBOB Gasoline July contract: $2.41 per gallon, up 0.89%. Year to date, gasoline is up 14.8%.
  • Natural Gas July contract: $2.95 per thousand cubic feet, down 2.82%. Year to date, gas has advanced 17.7%.

The Fed left its fed funds rate unchanged on Wednesday and penciled in just one reduction this year, down from three previously. Lower interest rates typically boost economic growth and lift crude oil demand. Fewer cuts this year potentially mean less upside for crude.

The U.S. reported a surprise oil stockpile build of 3.7 million barrels, whereas analysts had expected inventories would fall. Gasoline inventories rose by 2.6 million barrels as fuel demand remains soft.

"The market reaction and the respectable advance in oil prices indicates that rising demand and the subsequent fall in the volume of oil stored worldwide is the question of when and not if," Tamas Varga, analyst at oil broker PVM, said in a Thursday note.

"But just like the lowering of interest rates, it will come later than anticipated and the path higher will not be a straight line," Varga said.

A growing number of analysts see the oil market tightening at least through the third quarter before loosening in 2025. Peter Low, an analyst at Redburn Atlantic, sees an oil deficit of 1.7 million barrels per day, or bpd, in the third quarter and 1.5 million bpd in the fourth quarter, before becoming a surplus next year.

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