Oil Rises as Fed Rate Cut Expectations Strengthen

By Colleen Howe

BEIJING (Reuters) – Oil rose in early trading in Asia on Thursday on growing expectations that the Federal Reserve will cut interest rates in September and as the market rebounded from a sell-off linked to inventory growth Americans and the OPEC+ plan to increase supply.

Brent crude futures were up 27 cents, or 0.34 percent, at $78.68 a barrel by 0103 GMT, while U.S. West Texas Intermediate crude futures were up 36 cents, or 0.49%, to $74.43.

According to a Reuters survey from May 31 to June 5, nearly two-thirds of economists now expect an interest rate cut in September, offsetting recent bearish supply news.

Lower interest rates lower the cost of borrowing, which can boost economic activity and boost demand for oil.

Traders also view the sell-off caused by the US inventory data as “exaggerated”, ANZ analysts said in a note.

Prices initially fell in early trading Wednesday after U.S. crude inventories jumped by 1.2 million barrels in the week to May 31, compared with analyst estimates for a drawdown of 2.2 million barrels. 3 million barrels, according to data from the US Energy Information Administration.

But prices then rebounded to end the session up 1%, driven by perceptions that the selling had been too strong and growing interest rate optimism.

However, the Fed’s interest rate trajectory is far from a foregone conclusion. Activity in the U.S. services sector, which accounts for the vast majority of the country’s economic output, returned to growth in May after contracting the previous month, a development that could potentially weaken the case for a reduction in interest rates.

Oil prices fell after the Organization of the Petroleum Exporting Countries and its allies agreed on Sunday to extend most of their oil production cuts until 2025, but left eight members open to gradually winding down their cuts. volunteers from October.

In the Middle East, Hamas leader Ismail Haniyeh said Wednesday the militant group would demand a permanent end to the war in Gaza and Israel’s withdrawal as part of a ceasefire plan, which which appears to be a rebuttal to a peace proposal put forward by President Joe. Biden, while Israel announced a new military campaign against Hamas.

British security company Ambrey said on Thursday that a Greek bulk carrier was allegedly targeted by Yemen’s Houthis as it headed to the northern Red Sea.

However, geopolitical risks have recently taken precedence over market fundamentals.

(Reporting by Colleen Howe; Editing by Jamie Freed)

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