Oil prices in early Asian trading on Thursday climbed amid growing expectations that the Federal Reserve will lower interest rates in September. The market rebounded from recent declines linked to increased U.S. inventories and a plan by OPEC+ to boost supply.
Brent crude futures edged up 27 cents to reach $78.68 a barrel by 0103 GMT, while U.S. West Texas Intermediate crude futures rose 36 cents to $74.43.
A Reuters poll conducted from May 31 to June 5 indicated that nearly two-thirds of economists now anticipate a rate cut next month, countering recent bearish supply reports. Lower interest rates typically reduce borrowing costs, potentially stimulating economic activity and bolstering oil demand.
ANZ analysts characterized the earlier market selloff triggered by U.S. inventory data as excessive. According to the U.S. Energy Information Administration, crude stocks unexpectedly increased by 1.2 million barrels in the week to May 31, contrasting with expectations of a 2.3 million barrel draw.
After initially dipping, prices recovered to close Wednesday's session 1% higher, driven by perceptions that the selloff had been too severe and optimism over potential interest rate cuts.
Nevertheless, the Federal Reserve's stance on interest rates remains uncertain. U.S. services sector activity, crucial for the country's economic output, returned to growth in May after contracting the previous month, potentially complicating the case for rate reductions.
Oil prices had previously fallen following an agreement by OPEC and its allies to extend most of their oil output cuts into 2025, while allowing gradual unwinding of voluntary cuts from eight members starting in October.
Geopolitical developments, including statements from Hamas regarding a ceasefire plan in Gaza and a security incident involving Yemen's Houthis and a Greek-owned bulk carrier in the Red Sea, have been overshadowed by market fundamentals recently.
Paraphrasing text from "Reuters" all rights reserved by the original author.
