Oil prices rebound tracking weak dollar, tighter supply outlook

investing.com:

Investing.com — Oil prices rose in Asian trade on Thursday, recovering a bulk of losses from the prior session amid weakness in the dollar and a tighter outlook for supply, while markets also digested mixed signals on monetary policy from the Federal Reserve.

Crude prices had retreated from three-month highs on Wednesday after the Fed hiked rates as expected, but still left the door open for one more rate hike later this year. The move sparked some profit taking in oil markets, amid concerns that high interest rates will pressure crude demand.

But the Fed also signaled that the U.S. may not see a recession this year — a scenario that bodes well for oil demand, especially if local economic activity recovers from recent lulls.

This notion, coupled with a drop in the dollar following the Fed decision, helped support oil prices.

Brent oil futures rose 0.9% to $83.33 a barrel, while West Texas Intermediate crude futures rose 1% to $79.53 a barrel by 22:07 ET (02:07 GMT). Both contracts were now once again close to three-month highs.

Oil prices are expected to increase in the coming months, tracking tightness in global markets following supply cuts by the world’s largest producers.

Saudi Arabia and Russia both recently signaled lower production levels for August, with analysts expecting the supply cuts to potentially stretch into end-September.

The prospect of weaker supply helped offset a series of soft readings on U.S. inventories, with data on Wednesday showing that U.S. crude stockpiles shrank less than expected in the week to July 21.

But U.S. gasoline inventories contracted for a fourth straight week, while gasoline production also weakened more than expected, indicating that fuel demand in the world’s largest oil