By Stephanie Kelly
NEW YORK (Reuters) -Oil prices rose on Thursday on expectations that U.S. interest rates had peaked, but gains were capped by a large build in U.S. crude stockpiles and a forecast for slower demand growth next year from the International Energy Agency.
Brent futures rose 92 cents, or 1.1%, at $86.74 per barrel at 11:39 a.m. ET (1540 GMT). U.S. West Texas Intermediate crude gained 68 cents, or 0.8%, at $84.17 a barrel.
Prices pared gains after U.S. government data showed U.S. crude inventories rose by 10.2 million barrels in the last week to 424.2 million barrels, much higher than analyst expectations for a 500,000-barrel rise. [EIA/S]
U.S. crude output also hit a record 13.2 million barrels per day in the week, the data showed.
“The crude build was stunning. The market is taking it as a little bearish, and it’s pulled us off the (session) highs,” said Phil Flynn, an analyst at Price Futures Group.
Supporting crude futures earlier, world shares rose and the dollar and bond market borrowing costs held steady ahead of U.S. inflation data and European Central Bank meeting minutes that will add to the debate on where interest rates are heading.
Data on Thursday also showed that U.S. inflation was slowing, further supporting expectations that the Fed will freeze interest rate hikes next month.
Lower U.S. bond yields are stoking risk appetite, which in turn is supporting equities and oil, UBS analyst Giovanni Staunovo said.
“Both the Saudi energy minister Prince Abdulaziz and Russia’s deputy prime minister Novak reiterating their ongoing collaboration to balance oil markets are helping,” he added.
Saudi Energy Minister Prince Abdulaziz bin Salman said in a Russian TV interview that it was necessary to be “proactive” on bringing stability to the oil market, which had recently been hit by concerns that the Israel-Hamas war could disrupt supplies from the Middle East.
Russian Deputy Prime Minister Alexander Novak also reassured markets, saying the current oil price factored in the Middle East conflict and showed that the risk from it was not high.
Meanwhile, the IEA lowered its oil demand growth forecast for 2024, suggesting harsher global economic conditions and progress on energy efficiency will weigh on consumption.
The agency now sees 2024 demand growth at 880,000 barrels per day (bpd), compared with its previous forecast of 1 million bpd.
However, it raised its 2023 demand forecast to 2.3 million bpd from a forecast of 2.2 million.
In contrast, the Organization of the Petroleum Exporting Countries stuck to its forecast for relatively strong demand growth next year 2024, expecting it to reach 2.25 million bpd.
(Reporting by Stephanie Kelly in New York; additional reporting by Ahmad Ghaddar in London and Trixie Yap in Singapore; editing by Miral Fahmy, Elaine Hardcastle and David Gregorio)
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