Oil prices rise amid expectations of lower US interest rates
6 June 2024 10:48
On Thursday, oil prices rose for the second consecutive session as expectations grow that the US Federal Reserve will cut interest rates in September. However, the rise in prices is moderate due to the increase in US oil inventories and OPEC’s plans to increase supply, reports "Komersant Ukrainian" reports with reference to Reuters.
Brent crude futures were trading at $78.74 per barrel, up 33 cents or 0.42%. Futures for US WTI crude oil were trading at $74.46, up 39 cents or 0.53%.
According to a Reuters poll, almost two-thirds of economists predict the Fed will cut rates in September, and this will offset the recent negative supply news. Lower rates reduce the cost of borrowing, which could stimulate economic activity and boost oil demand.
However, the argument for lower rates may be weakened by the May increase in activity in the US services sector, which accounts for the majority of the country’s economic output.
Despite Thursday’s gains, oil benchmarks are still headed for a weekly decline of around 4% due to the latest decision by OPEC and allies. On Sunday, the group agreed to extend most of its oil production cuts until 2025, but left open the possibility of gradually phasing out voluntary cuts by eight members starting in October.
Analysts believe that OPEC’s decision to cancel the 2.2 million barrels per day cut in the fourth quarter of 2024 will add pressure to benchmark prices. It is also expected that pessimism will prevail due to expectations of weaker demand and higher inventories.
In addition, Saudi Arabia has cut its official selling prices for July crude amid falling benchmark prices for Middle East crude and weaker profitability of Asian refiners.
Meanwhile, according to the US Energy Information Administration, US crude oil stocks rose by 1.2 million barrels in the week to 31 May, while analysts had expected a 2.3 million barrels decline.
And Russian oil revenues continue to grow: 50% in May.
