Oil prices edged higher on Thursday, buoyed by optimism that potential U.S. interest rate cuts could boost economic activity and fuel demand. However, concerns over sluggish global demand, particularly in China, capped gains.
Brent crude futures rose 0.21 percent to $79.93 a barrel, recovering some ground after Wednesday’s losses. U.S. West Texas Intermediate (WTI) crude gained 0.27 percent to $77.19 per barrel.
Both benchmarks had fallen more than 1 percent on Wednesday after U.S. crude inventories unexpectedly increased and tensions over a wider Middle East conflict eased.
The moderate rise in U.S. consumer prices in July, with the annual inflation rate falling below 3 percent for the first time in nearly 3.5 years, has strengthened expectations that the Federal Reserve will cut interest rates next month.
Yuki Takashima, economist at Nomura Securities, stated that the oil market had experienced a correction in Asian trade due to being oversold on Wednesday. He added that investors are anticipating the Federal Reserve to begin cutting interest rates next month.
However, Takashima cautioned that oil prices are likely to remain under pressure going forward due to persistent concerns about sluggish global demand, particularly in China. He predicts WTI will head towards the $72 mark in early August.
ING analysts Warren Patterson and Ewa Manthey stated that the uncertainty surrounding the possibility of an escalation of war in the Middle East has resulted in heightened options trading activity, as market participants seek to safeguard themselves from substantial upside risk.
Separately, analysts at ANZ noted that recent oil inventory gains have raised concerns about weaker demand. U.S. crude oil stockpiles rose by 1.4 million barrels in the week ended August 9, compared with estimates for a 2.2 million barrel draw. This marked the first build since late June.
Read more: Oil prices rise as U.S. stockpiles shrink, Fed rate cut bets grow
Earlier this week, the International Energy Agency (IEA) lowered its 2025 estimate for oil demand growth, citing the impact of a weakened Chinese economy on consumption. This followed a similar downward revision by OPEC for 2024 demand.
China’s factory output growth slowed in July, while refinery output fell for the fourth consecutive month, highlighting the country’s uneven economic recovery.
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