Oil Prices Climb As U.S. Stocks Plummet Before Demand-heavy Holidays

Oil prices extended advances into a fourth consecutive session on Thursday after inventory data indicated that U.S. supplies were tight ahead of a demand-heavy holiday season; but, caution ahead of crucial economic indicators restrained gains.

In the preceding week, U.S. crude inventories decreased far more than anticipated, with drops in heating oil and jet fuel stocks occurring just ahead of an anticipated rise in travel demand and a possible cold snap towards the end of the year.

Even as the government took more than 3 million barrels of crude from the Strategic Petroleum Reserve, inventories decreased, showing that demand remained solid.

This week's increase in the yen has exerted downward pressure on the dollar, which in turn has boosted crude oil prices. However, the dollar stabilized on Thursday ahead of critical inflation and economic growth reports.

Brent oil futures traded in London increased 0.4% to $82.56 per barrel by 21:21 ET, while West Texas Intermediate futures rose 0.6% to $78.73 per barrel (02:21 GMT). Both contracts are trading approximately 5% higher for the week, with confidence regarding the reopening of China's economy further boosting sentiment.

On Thursday and Friday, respectively, revised U.S. gross domestic product (GDP) figures and the personal consumption expenditures (PCE) price index will be released. The second reading of U.S. economic growth for the third quarter is projected to remain unchanged at 2.9%, as robust consumer spending and a stable labor market supported the world's largest economy.

The PCE data, which is the Federal Reserve's favored inflation gauge, will be monitored more closely. Even while the number is predicted to have decreased more in November compared to the previous month, it is still anticipated to be considerably above the Fed's target range.

Last week, oil prices fell to a one-year low due to fears of a probable recession, which were fueled by rising interest rates and surging inflation. A spate of hawkish signals from the world's most influential central banks has also weighed on petroleum prices.

However, crude prices rebounded from annual lows as the dollar weakened. In addition to optimism on China's reopening, the government loosened anti-COVID laws.

China's near-term picture remains murky, as the world's largest crude importer is also confronting a massive increase in COVID-19 cases. However, the markets are bracing themselves for a potential revival in Chinese demand, which, according to some analysts, could bring oil prices back above $100 in 2023.