Oil prices extend rebound amid dovish Fed cheer, huge US inventory draw © Reuters.

Investing.com– Oil prices rose in Asian trade on Thursday, extending a rebound from over five-month lows as traders welcomed dovish signals from the Federal Reserve, while signs of a large draw in U.S. inventories also helped.

A weaker was a key point of support for oil after the Fed and will likely begin cutting them in 2024. The dollar sank to an over two-week low, aiding the prices of all commodities priced in the greenback.

The prospect of lower interest rates bodes well for the U.S. economy, and helped ease concerns that cooling growth will eat into oil demand. Markets were now of a rate cut by as soon as March 2024.

A bigger-than-expected, over 4 million barrel draw in offered some positive cues on U.S. demand, although gasoline inventories still rose, while oil production remained close to record highs.

Fears of worsening demand and oversupplied markets had driven oil prices to more than five-month lows this week, as recent production cuts by the Organization of Petroleum Exporting Countries for 2024 largely underwhelmed.

The trend was exacerbated by a string of weak economic readings from top oil importer China, with weak import data suggesting that oil demand in the country was also cooling.

But oil prices rebounded on Wednesday, taking some support from a large draw in U.S. inventories, while supply concerns in the Middle East also helped.

expiring February rose 0.8% to $74.91 a barrel, while rose 0.8% to $70.32 a barrel by 20:31 ET (01:31 GMT).

Middle East supply concerns remain in focus

Crude prices also took some support from concerns over supply disruptions in the Middle East, after an attack on a tanker in the Red Sea. The incident was the latest in a string of attacks on U.S. and Israeli vessels in the area by Yemen-backed Houthi forces.

The attack pushed up concerns over the spillover of a bigger conflict in the region, which could potentially disrupt supplies.

But the Israel-Hamas war, which was the cause of increased tensions in the region, has so far had little impact on Middle Eastern oil supplies. Traders had steadily priced down a risk premium from the conflict over the past two months.

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