Aug 15 2024: Oil prices climbed on Thursday, buoyed by hopes that potential U.S. interest rate cuts could spur economic activity and increase fuel consumption. However, concerns about slower global demand tempered these gains.
Brent crude futures advanced by 19 cents, or 0.24%, to $79.95 a barrel by 0625 GMT, recovering some losses from the previous day. Meanwhile, U.S. West Texas Intermediate crude futures rose by 23 cents, or 0.3%, to $77.21 per barrel.
The benchmarks had dropped over 1% on Wednesday due to an unexpected increase in U.S. crude inventories and reduced concerns about a broader Middle East conflict.
A moderate rise in U.S. consumer prices for July, with annual inflation dipping below 3% for the first time in nearly 3.5 years, strengthened expectations that the Federal Reserve may cut interest rates next month.
Yuki Takashima, an economist at Nomura Securities, noted that the oil market had been oversold on Wednesday, leading to a rebound in Asian trading. Investors are anticipating rate cuts from the Fed as early as next month.
Geopolitical tensions also lent support to oil prices. Iran’s possible response to the killing of the Hamas leader last month has kept the market cautious. Three senior Iranian officials have suggested that only a ceasefire deal in Gaza would prevent direct retaliation against Israel.
ING analysts pointed out ongoing geopolitical risks, noting that uncertainty over Iran’s potential actions has led to increased options trading as investors seek to protect against possible price spikes.
Despite these factors, rising oil inventories have raised concerns about weaker demand. U.S. crude stockpiles increased by 1.4 million barrels for the week ending August 9, diverging from expectations of a 2.2 million barrel draw and marking the first build since late June.
China’s economic data also pressured the market, with July’s factory output growth slowing and refinery output declining for the fourth month in a row, highlighting an uneven economic recovery.
Attention is now on U.S. retail sales data for July, with a disappointing result potentially triggering a short-term bearish move in oil prices, according to OANDA senior market analyst Kelvin Wong.
Analysts hold mixed views on future oil prices. Nomura’s Takashima expects prices to face downward pressure, forecasting WTI to approach the $72 mark seen in August. Conversely, independent analyst Tina Teng anticipates prices may rise in the third quarter due to Middle East tensions, central bank rate cuts, and a weaker U.S. dollar, with Brent potentially reaching $90 per barrel.
