Oil prices rose on Friday, driven by a combination of factors. Optimism over potential U.S. interest rate cuts and improved summer demand provided support, though oil was still set for weekly losses due to some profit-taking.
Ceasefire speculation lowers risk premium
Speculation around a ceasefire between Israel and Hamas also led traders to attach a lower risk premium to oil this week, though an actual agreement still seemed unlikely. Oil prices also logged some losses after Hurricane Beryl was seen causing limited disruptions in production along the Gulf of Mexico.
Brent oil futures for September delivery rose 0.1 percent to $85.52 per barrel, while West Texas Intermediate (WTI) crude futures increased 0.1 percent to $81.49 per barrel.
Softer inflation data drives dollar decline
The rise in oil prices was aided by a sharp drop in the U.S. dollar, after softer-than-expected inflation data in the U.S. increased bets on a September interest rate cut by the Federal Reserve. The greenback slid to a one-month low against a basket of currencies on Thursday.
Fed rate cut expectations increase
Consumer price index data for June came in slightly weaker than expected, boosting hopes that the Fed will have enough impetus to cut rates by 25 basis points in September. This was further supported by positive comments from Fed officials on disinflation and a cooling U.S. economy.
Weekly losses despite price rise
For the week, Brent and WTI futures were trading down 1.4 percent and 0.8 percent, respectively, as oil markets saw some profit-taking after a stellar run-up over the past four weeks, which had briefly pushed prices to over four-month highs. Prices had also declined earlier in the week on reports of progress in a ceasefire between Israel and Hamas.
Read more: Oil prices rise on weaker dollar, tighter supply bets ahead of CPI data
Oil prices shrug off weak start
Oil prices largely shrugged off a weak start to the week, as data showed U.S. oil inventories unexpectedly shrank in the past week. Travel demand in the world’s biggest fuel consumer, the U.S., was also seen reaching record highs last week, thanks to the Independence Day holiday. Global fuel demand is expected to remain robust as travel activity increases during the summer months, a notion reiterated by OPEC in a recent monthly report.
Focus is now on key trade data from top oil importer China, after inflation data from the country sparked more concerns over a slowing economic recovery.
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