By Adedapo Adesanya
Oil rose more than $1 on Wednesday as worries that global crop shortfalls could lower biofuel blending and increase oil demand.
Brent futures increased by $1.22 or 1.6 per cent to settle at $77.12 a barrel, while the US West Texas Intermediate (WTI) futures jumped by $1.34 or 1.9 per cent to $72.53 a barrel.
On Wednesday, US corn and soybean prices raced to multi-month highs after a government report showed much of the grains being stressed by dry conditions as they neared key development phases.
Also supporting oil prices was the information that the US Dollar fell against a basket of global currencies on Wednesday after Federal Reserve Chair Jerome Powell suggested that the central bank is nearing its policy destination.
Mr Powell reiterated that higher rates are needed to combat inflation in his semi-annual report to Congress.
He noted that two more rate hikes this year is “a pretty good guess,” while backing the central bank’s 2 per cent inflation target.
A cheaper greenback makes dollar-denominated oil more attractive for investors holding other currencies, raising demand.
According to market sources citing American Petroleum Institute (API) figures on Wednesday, US crude oil inventories fell last week, while gasoline inventories rose. Crude stocks fell by about 1.2 million barrels in the week ended June 16.
Official US oil inventory data from the Energy Information Administration (EIA) will be released on Thursday after being delayed a day by the Juneteenth public holiday on Monday.
Oil price gains were capped after data showed on Wednesday that British inflation defied expectations of a slowdown.
The rate held at 8.7 per cent in May, boosting expectations the Bank of England will raise interest rates by a half a percentage point on Thursday.
Market analysts warn that as countries struggle to tackle inflation, this may impact oil demand in the coming years.
Dipo Olowookere