Slowing inflation in the United States and China's determination to jump-start a struggling economy after the reopening pushed oil prices higher early on Wednesday as the market awaits Fed's rate decision and the weekly report on U.S. oil inventories.
As of early morning European trade on Wednesday, the U.S. benchmark, WTI Crude, was up by 1.12% at $70.20. The international benchmark, Brent Crude, was trading at $75.20, up by 1.22% on the day.
Oil prices were slightly higher early on Wednesday in Europe despite an estimate from the American Petroleum Institute (API) from late Tuesday that crude oil inventories in the United States increased last week by 1.024 million barrels, compared to expectations of a slight decline. Gasoline and distillate stocks were also estimated to have increased.
Oil prices early on Wednesday extended the strong gains from Tuesday, which were driven by brighter inflation figures from the United States and evidence that China is already taking steps to boost its economic growth.
The Chinese central bank cut a key short-term lending rate for the first time in 10 months, signaling it wants to spur the economic recovery. The world's top crude oil importer is also considering a broad stimulus package to support the economy, sources with knowledge of the plans told Bloomberg on Tuesday.
In the United States, data on Tuesday showed that inflation rose at a 4% annual rate in May, the lowest since April 2021, adding to expectations that the Fed would pause the rate hikes at its June meeting ending today.
According to data from CME Group, interest rate traders see early on Wednesday an 89.6% chance that the Fed would leave rates unchanged at the June meeting, after 10 consecutive meetings that ended with rate hikes.
The higher chances of a Fed pause in rates could raise the chances of a soft landing of the U.S. economy later this year.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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