Oil prices held steady on Thursday amid mixed signals regarding crude demand. Concerns about a potential U.S. economic slowdown were offset by growing expectations of an interest rate cut by the Federal Reserve.
By 11:41 a.m. EDT (1541 GMT), Brent futures inched up by 1 cent to reach $85.09 a barrel, while U.S. West Texas Intermediate (WTI) crude saw a slight increase of 6 cents to $82.91. Both benchmarks had posted gains in the previous trading session.
āCrude oil prices have rebounded from key support levels, with NYMEX crude surpassing $79-$79.5 and MCX crude climbing above 6700, both up by more than 3.5% from recent lows. This was supported by a larger-than-anticipated drawdown in weekly oil stocks in the U.S., signaling higher demand and further boosted by a weaker U.S. dollar,ā stated Pranav Mer, VP – Research (Commodity & Currency) at BlinkX and JM Financial.
Factors influencing crude oil prices
The number of individuals filing for unemployment benefits in the U.S. last week surpassed expectations. Initial claims for state unemployment benefits increased by 20,000 to 243,000 for the week ending July 1, adjusted for seasonal fluctuations.
This data reinforces the case for potential rate cuts by the Federal Reserve as soon as this month, potentially stimulating greater spending on oil. However, the rise in jobless claims also suggests an economic slowdown that could hinder crude demand, according to John Kilduff, a partner at Again Capital in New York.
The Chinese economic growth outlook weighed on oil prices. Chinese leaders reiterated their commitment to current economic policies on Thursday, though specific details were scarce. This tempered investor hopes of increased consumption efforts in the world’s second-largest economy.
Nevertheless, the anticipation of potential rate cuts by the U.S. Federal Reserve spurred some trading activity and prevented oil prices from experiencing a significant drop.
Recent statements from Federal Reserve officials suggest that the central bank is nearing a decision to lower interest rates, driven by favorable inflation trends and a stable labor market. Such a move could pave the way for a rate cut in September.
According to a Fed report released on Wednesday, U.S. economic activity exhibited slight to modest growth from late May to early July, with businesses anticipating slower expansion in the near term.
Meanwhile, the European Central Bank (ECB) maintained its expected stance on Thursday by keeping interest rates unchanged. The ECB refrained from hinting at future actions, citing persistent domestic price pressures and the expectation that inflation will surpass its target well into the next year.
