Oil prices increase over US Fed rate cut expectations

In the global commodities market, prices of crude oil increased early on Friday on hope that US Fed would cut rate in September as hawkish tendencies eased.

Latest data over US inventories decline also support positive demand outlook even with bearish outlook from China.

For the supply side, ceasefire negotiation stalled as Israel and Hamas failed to be on the same page. Analysts however queried if the US is a good actor in Middle East conflict nothing the role the American played in the whole scenario.

With the market development, hope of rates cut, demand surge expectations and tightening around crude oil supply, prices saw a moderate increase today.

ICE Brent crude rose 0.07% to $77.28 per barrel from $77.22.

US benchmark West Texas Intermediate (WTI) increased by 0.06% to $73.06 per barrel, after closing at $ 73.01 in the prior session.

While analysts marked that the Fed is expected to cut interest rates by a total of 100 basis points by the end of the year, investors are now focused on Fed Chair Jerome Powell’s speech on Friday at the annual Jackson Hole symposium in the US state of Wyoming.

The growing expectations that the Fed will cut interest rates in September, supports upward price movements as a rate cut would likely to weaken the US dollar against other currencies, positively impacting oil demand.

The US dollar index fell by 0.21% to 101,30 compared to the previous trading session.

Meanwhile, the unsuccessful cease-fire negotiations in the Middle East, home to a vast majority of global oil reserves, contributed to price increases by heightening supply concerns among market players.

The latest round of mediated negotiations between Israel and Hamas concluded on August 16 in Doha, Qatar. During this session, the US presented a “final bridging proposal” which the White House stated aligns with the principles endorsed by President Joe Biden on May 31.’

However, the parties did not reach an agreement, as Hamas has consistently demanded the complete withdrawal of Israeli forces from Gaza and a permanent end to the conflict as conditions for any cease-fire.

In contrast, Israeli Prime Minister Benjamin Netanyahu has rejected these demands, asserting that Israeli troops will remain in Gaza for as long as deemed necessary.

Prices staged a recovery on Thursday, breaking a four-day streak of declines which had pushed the market towards oversold territory, ING analysts say in a note.

Oil group, OPEC+ will still be concerned about the recent weakness in the market and it is increasingly likely that the group will have to ditch plans to start raising supply from October, ING commodities strategists said in a note.

However, this will depend on where the market is trading towards the end of September, ING adds.