Market Analysis
Oil prices experienced a slight increase on Thursday, driven by expectations that potential U.S. interest rate cuts could stimulate economic activity and boost fuel consumption. However, concerns about weaker global demand limited the gains.
Brent crude futures rose by 17 cents, or 0.21%, to $79.93 per barrel as of 0348 GMT, partially recovering from the previous day's losses. Meanwhile, U.S. West Texas Intermediate crude climbed by 21 cents, or 0.27%, to $77.19 per barrel.
Both benchmarks had dropped over 1% on Wednesday due to an unexpected rise in U.S. crude inventories and diminished fears of a broader Middle East conflict.
U.S. consumer prices saw a moderate increase in July, with the annual inflation rate falling below 3% for the first time in nearly three and a half years. This has bolstered expectations that the Federal Reserve might cut interest rates next month.
Yuki Takashima, economist at Nomura Securities, noted that the oil market had been oversold on Wednesday, leading to a correction during Asian trading hours. Investors are optimistic that the Fed might begin reducing rates next month. However, Takashima expects oil prices to face ongoing pressure due to concerns about sluggish global demand, particularly from China. He predicts that WTI could approach the $72 mark in early August.
Additionally, geopolitical tensions have further supported oil prices. There are concerns about how Iran might respond to the recent assassination of a Hamas leader. Some Iranian officials have suggested that only a ceasefire agreement in Gaza could prevent Iran from retaliating directly against Israel.
ING analysts Warren Patterson and Ewa Manthey highlighted that geopolitical risks continue to influence the oil market, contributing to increased options trading as investors seek to protect themselves from potential significant price swings.
On the other hand, rising oil inventories have raised concerns about weakened demand. U.S. crude oil stockpiles increased by 1.4 million barrels for the week ending August 9, contrary to expectations of a 2.2 million barrel draw, marking the first increase since late June.
Earlier this week, the International Energy Agency lowered its 2025 oil demand growth forecast due to the impact of a slowing Chinese economy. This followed a similar reduction in the 2024 demand forecast by OPEC. China's factory output growth slowed in July, and refinery output declined for the fourth consecutive month, highlighting the uneven pace of the country's economic recovery.
Paraphrasing text from "Reuters" all rights reserved by the original author.