By Sibel Morrow
Oil prices rallied on Thursday after data indicating higher demand in the US, the world’s largest oil-consuming country, and China’s central bank decision to cut banks’ reserve ratio, indicating more support measures to come.
The international benchmark crude Brent traded at $80.41 per barrel at 10.20 a.m. local time (0720 GMT), a 0.46% increase from the closing price of $80.04 a barrel in the previous trading session on Wednesday.
The American benchmark, West Texas Intermediate (WTI), traded at the same time at $75.49 per barrel, up 0.53% from Wednesday’s close of $75.09 per barrel.
Oil prices advanced in Asian trade over strong US demand expectations after a larger-than-expected fall in crude oil stockpiles.
According to data released by the Energy Information Administration (EIA) on Wednesday, US commercial crude oil inventories decreased by around 9.2 million barrels to 420.7 million barrels, compared to the market expectation of a fall of around 3 million barrels.
The depreciation in the US dollar against other currencies also aided oil price rises, as the market expects that the Federal Reserve will lower interest rates this year, with a cut in March looking increasingly likely. When the Federal Reserve cuts interest rates, the value of the dollar falls.
China, the world's largest importer and second-largest oil consumer, ramped up efforts to revive its economy, which in turn drove up oil prices.
On Wednesday, the country decided to cut the reserve requirement ratio for banks within two weeks to quell market panic and revive investor confidence.
“Nevertheless, the gains were limited amid ongoing concerns of strong growth in supply outside of OPEC,” according to Daniel Hynes, a commodity strategist at Australia and New Zealand Banking Group.
“While the alliance (OPEC) is still enacting its most recent production cuts,” Hynes noted, “supply from the US, Nigeria, and a host of smaller producers is keeping the market relatively well supplied.”