Oil prices move higher as U.S. product oil inventory, inflation fall

U.S. oil prices extended gains Wednesday on lower-than-expected U.S. inflation and supportive weekly oil inventory data.

The West Texas Intermediate (WTI) for May delivery rose 1.73 U.S. dollars, or 2.12 percent, to settle at 83.26 dollars a barrel on the New York Mercantile Exchange. Brent crude for June delivery increased 1.72 dollars, or 2.01 percent, to settle at 87.33 dollars a barrel on the London ICE Futures Exchange.

U.S. consumer price index for March recorded 0.1 percent of month-on-month increase, lower than market consensus forecast of 0.3 percent and 0.4 percent of expansion in the previous month, according to data issued on Wednesday morning.

The lower-than-expected inflation fueled market optimism on oil demand and triggered a sharp growth of oil prices.

U.S. commercial oil inventories for the week ending April 7 increased 0.6 million barrels from the previous week while motor gasoline and distillate fuel inventories in the period decreased by 0.3 million barrels and 0.6 million barrels week on week, respectively, according to data issued by the U.S. Energy Information Administration (EIA) on Wednesday.

Crude prices are rallying after a moderating inflation report was followed by an EIA report that highlighted tightness at Cushing and strong gasoline demand, said Edward Moya, senior market analyst at OANDA, a supplier of online multi-asset trading services.

Moreover, the Joe Biden administration intends to refill the U.S. Strategic Petroleum Reserve soon, according to U.S. Energy Secretary Jennifer Granholm.

The rally in crude really stands out on Wednesday and oil looks like it could be breaking out here, according to Moya.