Oil rises on Tuesday, supported by expectations that U.S. crude inventories may drop and signs of robust demand in emerging markets. The U.S., the world's largest oil consumer, is expected to experience a fall in inventories, while demand in India, the third-largest oil consumer, has remained healthy, with a 5% jump in fuel consumption in March. Moreover, gains in Asian equity markets, as well as central banks' decision to keep interest rates steady, likely boosted crude futures.
India's strong fuel demand has been a significant factor in supporting oil prices. Last month, fuel consumption in India surged by 5%, reaching a record of 4.83 million barrels per day, making it the world's third-biggest oil consumer. Russia's Urals crude continues to be the country's primary source of crude, despite the resorting of global oil trade flows in the wake of the Ukraine invasion.
Oil futures rose more than 5% after OPEC and its allies, including Russia, announced a new round of production cuts starting in May. The move surprised the market and supported oil prices, which have been climbing for three consecutive weeks.
Industry data on U.S. crude stockpiles is due on Tuesday, with analysts estimating an average fall of about 1.3 million barrels in the week to April 7. The U.S. is the world's largest oil consumer, and any significant drop in inventories is likely to boost crude futures.
Expectations of a Federal Reserve rate hike and a U.S. inflation report have been weighing on oil prices. The U.S. dollar index rose on Monday and Tuesday, driven by rate hike expectations, making oil more expensive for other currency holders. Moreover, the inflation report, which will be released on Wednesday, is likely to help investors gauge the near-term trajectory for interest rates.
Forex traders are closely watching oil prices, as they often have a significant impact on the currency market. A rise in oil prices usually benefits countries that are major oil exporters, such as Canada, Russia, and Norway, leading to a stronger currency. Conversely, oil importers, such as Japan and India, may experience a weaker currency due to higher oil prices. As such, forex traders are likely to keep an eye on the U.S. stockpile data and other factors that could affect oil prices.