Crude oil prices are about to book another weekly gain, boosted by the Energy Information Administration's latest inventory report.
On Thursday, the EIA reported draws across crude and fuels, suggesting the strong driving season some analysts expected may be unfolding indeed. A report by the AAA forecasting record travel over the July 4 weekend also helped boost optimism on the oil market.
The AAA projected this week that the holiday weekend would see a record 71 million people take to roads and airports, which would be a 4.8% increase over last year's July 4 weekend. This would add to evidence that while many Americans are finding life harder in an environment of high interest rates and still substantial inflation, traveling has not been among the things they've cut back on.
"People may be willing to cut back on goods, but they're not cutting back on experiences," AAA spokesperson Aixa Diaz said, as quoted by Bloomberg.
Additional support for prices, which have gained some 10% since the start of the month, came from the latest weekly jobless claims report. It showed a decline in the number of people filing for jobless benefits for the first time, suggesting the labor market was going in a positive direction that could finally motivate the Fed to start cutting rates.
The U.S. central bank has resisted rate cuts despite growing inflation pains among consumers with the argument that inflation has further down to go before the cuts begin. Changing trader sentiment about these rate cuts has driven oil price movement for months now.
On the demand front, China remains a downside risk, one Commonwealth Bank of Australia analyst told Bloomberg, noting growth has been weakening.
"Over the near term, we think China's oil demand growth disappointing market expectations is the key downside risk to consider," Vivek Dhar said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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