NEW YORK: Oil prices rose nearly 1% on Wednesday from a two-month low in the prior session as the market balanced bullish U.S. economic and crude storage data against the International Energy Agency’s (IEA) forecast for weaker global oil demand growth.

Brent futures rose 37 cents, or 0.5%, to settle at $82.75 a barrel, while U.S. West Texas Intermediate crude (WTI) gained 61 cents, or 0.8%, to end at $78.63.

That cut the premium of Brent over WTI to its lowest since March 28. A narrower premium makes it less profitable for energy companies to send vessels to the U.S. to pick up crude cargoes for export.

Earlier in the session, the bearish IEA report helped push both benchmarks into technically oversold territory with prices at their lowest since February. On Tuesday, both benchmarks closed at their lowest since March 12.

Prices reversed direction after U.S. data showed a bigger-than-expected crude drawdown and lukewarm inflation that fueled expectations of a cut in interest rates later this year.

OPEC sticks to oil demand view, shifts key forecast to OPEC+

U.S. crude inventories last week fell 2.5 million barrels, the Energy Information Administration (EIA) said, much more than the 500,000-barrel draw forecast in a Reuters poll.

“The crude oil draw is mostly from the increase in the refinery utilization rate … Refiners finally got serious about that, finally cranked it up a bit,” Bob Yawger, director of energy futures at Mizuho told Reuters.

U.S. consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations the U.S. Federal Reserve (Fed) will cut interest rates in September.

Lower interest rates would reduce borrowing costs for businesses and consumers and could spur economic growth and demand for oil.

With the Fed expected to cut interest rates later this year, the U.S. dollar, opens new tab fell to a five-week low against a basket of other currencies.

A weaker dollar can boost demand as the greenback-denominated commodity becomes less expensive to buy in other currencies.

The IEA trimmed its forecast for 2024 oil demand growth, widening the gap with producer group OPEC in terms of expectations for this year’s global demand outlook.

The Organization of the Petroleum Exporting Countries and its allies like Russia, a group known as OPEC+, is likely to hold its June 1 oil policy meeting online, four OPEC+ sources said, rather than in Vienna as currently scheduled.

In Canada, meanwhile, favorable winds are expected to push a major wildfire away from the oil sands city of Fort McMurray, officials said, less than a day after 6,000 people were ordered to leave.

Fort McMurray is the hub for Canada’s oil sands output. A huge wildfire in 2016 forced the evacuation of 90,000 residents and shut in more than 1 million barrels per day of output.