Oil erased earlier losses to close higher, but remained within a tight range as traders weighed shrinking U.S. stockpiles and the outlook for inflation in the world’s largest economy.

West Texas Intermediate edged higher to settle above $79, though the U.S. benchmark has been wedged between about $77 and $82 a barrel this month. U.S. oil inventories fell by 2.5 million barrels last week for the first back-to-back drop since March, taking nationwide holdings to the lowest in almost a month.

More broadly, risk-on sentiment is bolstering markets as a measure of U.S. inflation cooled for the first time in six months, offering scope for looser monetary policy from the Federal Reserve.

“Recent macro data from the U.S. has raised expectations that the Fed could start cutting rates soon, which will be providing some support to oil,” said Warren Patterson, head of commodities strategy for ING Groep NV. 

The market remains range-bound, and needs either clarity on OPEC+ policy or a fresh catalyst to break out, he said.

Oil prices are still around 11 per cent higher this year as OPEC+ curtailed output to prevent a glut. In the run-up to a June 1 meeting where the group will decide whether to continue the cuts, members are grappling with the thorny issue of how much oil they are capable of pumping. Several major exporters are seeking to have their levels upgraded, with a view to securing the right to pump more crude in 2025.

Meanwhile, WTI futures have been testing their 100-day moving average of US$78.60 per barrel, which has served as a support level after a monthlong selloff. 

Prices:

• WTI for June delivery added 0.8 per cent to settle at $79.23 a barrel in New York.
• Brent for July settlement added 0.6 per cent to $83.27 a barrel.