Oil steady on expectations of Fed interest rate cuts

Oil steady on expectations of Fed interest rate cuts

The prices of raw stabilized on Thursday, as support from growing expectations of an interest rate cut by the United States Federal Reserve (Fed) in September offset the increase in US inventories and the plans of the OPEC+ to gradually increase supply.

By mid-morning, Brent futures were up 25 cents, or 0.3%, at $78.66 a barrel, and U.S. West Texas Intermediate (WTI) futures were up 31 cents, or 0.4%, at $74.38.

Oil benchmarks advanced more than 1% on Wednesday, recovering after losing almost $8 in the five sessions through Tuesday.

Nearly two-thirds of economists now predict that the Fed will cut rates in September, according to a Reuters poll from May 31 to June 5, countering recent bearish news on supply.

Lower rates reduce the cost of borrowing, which can spur economic activity and boost oil demand. Even so, prices are on track to close the week with decreases of more than 3%.

Saad Rahim, Trafigura’s chief economist, stated that the group’s decision OPEC+ gradually eliminating some of its pumping cuts starting in October, combined with strong supply in the product market, put downward pressure on oil prices.

The OPEC+, which brings together members of the Organization of Petroleum Exporting Countries (OPEC) and allies, agreed on Sunday to extend most of its production cuts until 2025, but left room for eight members’ voluntary cuts to be gradually undone.

Elsewhere, US crude stockpiles rose by 1.2 million barrels in the week to May 31, while analysts expect a drawdown of 2.3 million barrels, according to data from the United States Energy Information Administration.

Source: Ambito

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