Oil Prices Rise on Eased Demand Concerns and Fed Rate Speculation
Oil prices experienced weekly gains of over 3.5% as concerns about demand waned on the back of positive economic data. The possibility of an interest rate reduction by the U.S. Federal Reserve in September also supported prices.
Last week, oil prices climbed further on signals from Federal Reserve policymakers that they might initiate interest rate cuts as early as September. Additionally, ongoing concerns about a widening conflict in the Middle East continue to elevate supply risks.
Brent crude futures closed at $79.66 a barrel, up 50 cents, while U.S. West Texas Intermediate crude futures rose by 65 cents to $76.84 a barrel. Both Brent and West Texas Intermediate crude witnessed gains of over 3.5% and 4%, respectively, during the week.
The upward trend was further supported by several factors. Three Federal Reserve policymakers expressed increased confidence in the diminishing inflation rate, suggesting an imminent reduction in interest rates. Additionally, data revealed a significant decrease in new claims for unemployment benefits, indicating that fears of a weakening labor market were unfounded and dampening recession concerns.
Furthermore, China’s consumer price index slightly exceeded market expectations in August, providing further support for oil prices. The weakening dollar also contributed to the price increase, as a weaker dollar boosts demand for crude oil for foreign buyers.
The National Oil Corporation of Libya declared force majeure on the Sharara oilfield on Wednesday, citing gradual production reductions due to protests, adding another layer of support to oil prices.