Oil prices advance as dollar sinks on Fed’s rate cut talk

investing.com:

Investing.com-- Oil prices rose in Asian trade on Thursday, benefiting from a weaker dollar as the Federal Reserve flagged three interest rate cuts in 2024, while the prospect of tighter supplies continued to buoy crude. 

The dollar index fell sharply  after Federal Reserve Chair Jerome Powell’s address on Wednesday, aiding commodity prices. Powell also flagged strength in the U.S. economy, which presents a positive scenario for oil demand.

Brent oil futures expiring in May rose 0.5% to $86.41 a barrel, while West Texas Intermediate crude futures rose 0.5% to $81.15 a barrel by 21:47 ET (01:47 GMT). Both contracts remained in sight of over four-month highs hit earlier in the week.

Crude’s biggest point of support on Thursday was a drop in the dollar. The dollar index slid 0.6% from a two-week high after Powell said that the Fed was still considering cutting interest rates by three quarters of a percentage point this year. 

While Powell flagged some concerns over sticky inflation, he also noted that the U.S. economy remained resilient. The Fed upgraded its quarterly economic projections and now expects the economy to grow 2.1% in 2024, up substantially from the prior forecast of 1.4%. 

Lower interest rates and strength in the U.S. economy bode well for demand in the world’s biggest fuel consumer, which is expected to improve during the spring season.

Expectations of tighter oil supplies, which were a key driver of crude gains in the past two weeks, remained largely in play. Official U.S. inventory data showed on Wednesday that crude oil inventories shrank more than expected in the week to March 15.

The draw was driven by increased refinery activity and higher oil exports.

A bigger-than-expected draw in gasoline