Investing.com-- Oil prices edged higher Thursday, gaining support from U.S. inventory data, which showed that demand in the world’s biggest fuel consumer remained strong.
At 10:10 ET (14:10 GMT), Brent oil futures expiring in May rose 0.7% to $71.24 a barrel, while West Texas Intermediate crude futures rose 0.7% to $67.34 a barrel.
Oil had slumped to an over three-year low earlier in March on concerns over sluggish demand, U.S. trade tariffs and increasing supplies. These factors still remained in play, limiting oil’s overall recovery.
US fuel draw offers support
U.S. government data showed on Wednesday that crude oil inventories clocked a bigger-than-expected build in the past week.
But distillate stocks saw an unexpected, outsized draw, far outpacing builds in broader inventories and fuel stocks.
The distillate draw drummed up hopes that fuel demand in the U.S. remained robust despite signs of a cooling economy.
"U.S. gasoline inventories have fallen for three consecutive weeks. They’re now the lowest since early January," said analysts at ING, in a note. "Gasoline inventories dropped despite implied demand falling over the week and refinery utilisation increasing marginally. Overall, recent data is supportive for the market."
Elsewhere, Israel launched a wave of devastating strikes against Hamas targets in the Gaza strip this week, ending a two-month-long ceasefire. This came shortly after the U.S. attacked the Yemeni Houthis group over its disruption of shipping lanes in the Red Sea.
The two events saw traders attaching a greater risk premium to the commodity, amid renewed fears that geopolitical tensions in the Middle East will disrupt supplies.
On the geopolitical front, focus was also on a tentative Russia-Ukraine peace deal, after Kyiv and Moscow agreed to not attack each others’ energy infrastructure for a month.
Oil markets digest Fed outlook
Still, bigger gains in oil were held back by persistent caution over slowing demand, increasing production and a brewing global trade war.
The Federal Reserve on Wednesday kept interest rates unchanged and flagged continued uncertainty over the U.S. economy, especially as policymakers attempt to gauge the impact of President Donald Trump’s trade tariffs.
But the central bank also hiked its inflation forecast and lowered its expectations for U.S. economic growth, highlighting some concerns over an economic slowdown in the coming months. Such a scenario could hamper oil demand.
Data released earlier Thursday showed the number of Americans filing for first-time unemployment benefits edged marginally higher last week, suggesting ongoing resilience in the U.S. labor market.
Initial jobless claims, a proxy for hiring, inched up to 223,000 in the week ended on March 15, increasing from an upwardly-revised mark of 221,000.
Outside the U.S., optimism over more stimulus measures in China- the world’s biggest oil importer- also aided oil prices, although traders were waiting for more signs of an improving Chinese economy.
(Ambar Warrick contributed to this article)