By Colleen Howe
BEIJING (Reuters) – Oil rose in early Asian trading on Thursday on growing expectations that the Federal Reserve will cut interest rates in September and as the market recovered from a sell-off linked to rising U.S. inventories and an OPEC+ plan to increase supply.
Brent crude futures were up 27 cents, or 0.34%, at $78.68 a barrel by 0103 GMT, while U.S. West Texas Intermediate crude futures were up 36 cents, or 0.49%, at U.S. $74.43.
Almost two-thirds of economists now predict an interest rate cut in September, according to a Reuters poll from May 31 to June 5, offsetting recent pessimistic news about supply.
Lower interest rates lower the cost of credit, which can encourage economic activity and boost oil demand.
Traders are also viewing the sell-off based on US inventory data as “overdone”, ANZ analysts said in a note.
Prices initially fell in early trading Wednesday after U.S. crude inventories jumped 1.2 million barrels in the week to May 31, compared with analysts’ estimates of a draw of 2.3 million. of barrels, data from the U.S. Energy Information Administration showed.
But prices later recovered, ending the session up 1%, driven by sentiment that the sell-off had been too steep and growing interest rate optimism.
However, the Fed’s interest rate trajectory is far from a foregone conclusion. Activity in the US services sector, which represents the vast majority of the country’s economic output, returned to growth in May after a contraction in the previous month, in a change that could potentially weaken arguments in favor of interest rate cuts.
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 room for eight members’ voluntary cuts to be phased out. from October.
In the Middle East, Hamas leader Ismail Haniyeh said on Wednesday that the militant group would demand a permanent end to the war in Gaza and Israel’s withdrawal as part of a ceasefire plan, in what appeared to be a rebuttal to a peace proposal presented by President Joe. Biden, while Israel announced a new military campaign against Hamas.
British security firm Ambrey said on Thursday that a Greek-owned bulk carrier was allegedly targeted by Yemen’s Houthis as it traveled northward in the Red Sea.
However, geopolitical risks have recently taken a backseat to market fundamentals.
(Reporting by Colleen Howe; Editing by Jamie Freed)
