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In early Asian trading on Thursday, oil prices experienced an increase, continuing the upward trend from the previous session. This rise is attributed to a larger-than-expected decrease in U.S. crude inventories and indications from the U.S. Federal Reserve that it plans to reduce borrowing costs in 2024.

The prospect of lower interest rates, which typically reduce consumer borrowing costs, can stimulate economic growth and, consequently, increase demand for oil. Additionally, these developments have led to a decline in the value of the U.S. dollar, making oil more affordable for buyers using other currencies.

Brent crude futures climbed by 46 cents, or 0.6%, to close at $74.72 a barrel at 0007 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude futures saw a rise of 48 cents, or 0.7%, settling at $69.95.

Market sentiments were also influenced by concerns over the security of oil supplies from the Middle East. This followed an incident involving a tanker attack in the Red Sea. Gunmen in a speedboat attacked a tanker off the coast of Yemen, and there were reports of missile targeting. This incident adds to the existing tensions in the region, especially following warnings from Yemeni Houthi forces to ships traveling towards Israel.

According to the U.S. Energy Information Administration, there was a significant withdrawal of 4.3 million barrels from U.S. crude stockpiles in the week ending December 8, exceeding expectations. This reduction was partly due to a decrease in imports.

The Organization of the Petroleum Exporting Countries (OPEC) in its monthly report attributed the recent decline in crude prices to “exaggerated concerns” about the growth in oil demand. Since the announcement of new production cuts by OPEC+ on November 30, Brent futures have fallen approximately 10%. OPEC+, the group that includes OPEC and its allies like Russia, is a key player in global oil production and pricing.

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