Oil Prices Are Set for a Weekly Gain as Yellen Sees Inflation Falling

Crude oil prices may end this week in the green as the U.S. Treasury suggested the weak first-quarter GDP data may be revisable and as supply concerns persisted.

If the benchmarks do indeed end the week with gains, it would be the first positive week in three.

"The U.S. economy continues to perform very, very well," Janet Yellen told Reuters yesterday commenting on the latest economic reports out. Those showed a GDP growth rate of just 1.6% for the first quarter and an accelerated inflation rate of 3.7% in personal consumption expenditures.

Expectations had been rather different, with GDP seen at 2.4% by analysts polled by Reuters.  The quarterly change in the rate of personal consumption expenditures inflation was also surprising.

"The fundamentals here are in line with inflation continuing back down to normal levels," the Treasury Secretary said, which served to quickly quench any concern oil traders may have had about the state of the economy of the world’s biggest oil consumer.

Meanwhile, Israel said it was going to bomb Rafah again, which seems to have reignited concern about the security of oil supply in the Middle East as Tel Aviv’s Western allies urged the country not to step up the attacks for fear of escalation with Iran.

A third factor that has helped oil prices this week was the state of U.S. inventories, which booked a decline for last week. The Energy Information Administration said on Wednesday that crude oil inventories had shed as much as 6.4 million barrels in the week to April 19—an amount apparently seen as sizeable enough to motivate a more bullish sentiment on the oil market.

As a result of all this, Brent crude is back above $89 climbing towards $90 per barrel and West Texas Intermediate is closing in on $84 per barrel again.

By Irina Slav for Oilprice.com

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