Feb 1, 2024: Oil prices experienced a slight increase on Thursday, propelled by signals from the U.S. Federal Reserve suggesting potential rate cuts and new support measures introduced by China to stabilize its troubled property market.
Brent crude futures saw a 0.5% rise, reaching $80.98 a barrel, while U.S. West Texas Intermediate crude futures gained 0.6%, settling at $76.29 as of 0405 GMT. This comes after a decline of over $2 a barrel in the previous session.
Market analysts attribute the rebound in oil prices to expectations of rate cuts in 2024 following Federal Reserve Chair Jerome Powell’s indication of a possible end to the rate-hiking cycle. Powell emphasized that interest rates had peaked and were expected to decrease in the coming months, considering the ongoing decline in inflation and the anticipation of sustained job and economic growth.
Reinforcing the likelihood of rate cuts, recent data revealed that U.S. labor costs rose less than anticipated in the fourth quarter, marking the smallest annual increase in two years.
Furthermore, China, the second-largest global economy, unveiled additional measures to support its property market amid concerns about the aftermath of Evergrande’s liquidation. The country concluded the previous year with the sharpest declines in new home prices in nearly nine years.
JPMorgan analysts expect China to remain a significant contributor to global oil demand growth in 2024, forecasting a growth of 530,000 barrels per day (bpd) following a surge of 1.2 million bpd in the previous year.
Despite geopolitical concerns, such as potential attacks on shipping in the Red Sea by Yemen-based Houthi forces, the oil market is cautiously awaiting a U.S. response to the recent drone attack on American troops in Jordan. The Houthi group declared its intention to continue such attacks on U.S. and British warships in the Red Sea, terming them acts of self-defense.