HomeFutures and CommoditiesRising oil prices due to strong OPEC demand and ongoing geopolitical tensions,...

Rising oil prices due to strong OPEC demand and ongoing geopolitical tensions, according to Investing.com.

Oil Prices Surge Amid OPEC Demand Forecast and Geopolitical Tensions

Oil Prices Rise on Strong OPEC Demand Outlook

Oil prices surged in early U.S. trade on Wednesday as traders assessed a robust demand forecast from the OPEC producer group. The Organization of the Petroleum Exporting Countries (OPEC) kept its outlook for global crude demand unchanged in a report released on Tuesday. A report from the International Energy Agency is due later this week.

Geopolitical Tensions and Oil Prices

Persistent geopolitical tensions in the Middle East and Russia, along with fears over their potential impact on supplies, have also supported crude prices. Contracts expiring in April had added 0.9% to $83.52 a barrel, while contracts for May had advanced by 1.1% to $78.72 per barrel by 09:44 ET (14:44 GMT).

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Market Reaction and U.S. Inflation

Gains were limited as markets continued to assess a hot U.S. inflation reading that further dented bets on imminent rate cuts by the Federal Reserve. Sticky inflation gives the U.S. central bank more cause to keep interest rates higher for longer, a trend that is expected to stymie economic activity and potentially curb oil demand in the coming months.

U.S. Crude Inventories and Production

Data on Tuesday from the American Petroleum Institute (API) showed U.S. crude inventories grew by 8.5 million barrels in the week to February 9, much more than estimates for an increase of 2.6 million barrels. The API data usually heralds a similar trend from the Energy Information Administration (EIA), which is due out on Wednesday. The large build in overall inventories likely indicates that U.S. production remained strong in the past week.

The Impact of U.S. Oil Production

High U.S. production has been a pain point for oil prices, given that it is likely to keep markets well supplied despite moves by OPEC and its allies to reduce output. U.S. oil production roared back to record highs of over 13 million barrels earlier in February, as the impact of a cold snap showed signs of easing.

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