Oil Resumes Rally as Asian Equities Gain, US Inventories Decline

(Bloomberg) -- Oil advanced, tracking gains in wider Asian equity markets, after US crude inventories declined and the Federal Reserve indicated that any more rate hikes would be data-dependent.

West Texas Intermediate traded above $79 a barrel, rising for the fifth time in six sessions, as benchmark stock indexes in Hong Kong and Australia climbed. There’s growing speculation the Fed is nearing the end of its monetary tightening cycle, after it raised interest rates for the 11th time since March.

US equities advanced after the decision, suggesting traders are expecting a slowing of the most aggressive tightening campaign since the 1980s. The dollar also weakened despite the move, with a Bloomberg gauge of the greenback on its third day of declines, making commodities cheaper for most international buyers. 

Meanwhile, nationwide crude stockpiles fell by 600,000 barrels last week, and inventories at the storage hub in Cushing, Oklahoma, dropped to the lowest since May, data from the US Energy Information Administration showed.

The “minimal drawdown” in US inventories and the drop in the dollar after the Fed decision “mends the floor beneath oil’s ongoing flight,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova Pte Ltd. “The technical psychological level of $80 per barrel for WTI might just be around the corner.”

A tightening supply outlook, along with signs that top importer China may move to stimulate its economy further, has helped crude rally over the previous few weeks. Hawkish monetary policy in the US and Europe and lackluster growth in China had weighed on prices earlier in the year.

Saudi Arabia is expected to extend its 1 million barrel a day oil supply cut into September as it seeks to foster a tentative recovery in prices, according to a Bloomberg survey. With Russia also curbing output, banks including Standard Chartered Plc are anticipating a deepening shortfall in the coming months.

Gasoline markets are also flashing bullish signals, with prices of the vehicle fuel surging globally in a sign of increasing demand. Futures soared to a nine-month high in New York, sending shock waves through to the pump, while prices have also been rising in Asia.

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