WionDrive News Desk 
Oil prices witnessed an upward trajectory in early Asian trading on Thursday, fueled by rising expectations that the Federal Reserve will implement an interest rate cut in September. This rebound came after a selloff that was triggered by concerns over growing U.S. inventories and OPEC+’s plan to increase supply.
Brent crude futures climbed by 27 cents, or 0.34 per cent, reaching USD 78.68 per barrel by 0103 GMT, while U.S. West Texas Intermediate crude futures rose by 36 cents, or 0.49 per cent, trading at USD 74.43.
The prospect of an interest rate cut in September has gained significant momentum, with nearly two-thirds of economists now predicting such a move, according to Reuters’ May 31-June 5 poll. This development has overshadowed the recent bearish supply news, providing a boost to oil prices.
Lower interest rates can decrease the cost of borrowing, potentially incentivizing economic activity and boosting oil demand. Traders are also viewing the selloff that occurred in response to the U.S. inventory data as an overreaction, according to a note from ANZ analysts.
Initially, prices fell in early trading on Wednesday after data from the U.S. Energy Information Administration revealed that U.S. crude stocks had surged by 1.2 million barrels in the week ending May 31, defying analysts’ estimates of a 2.3 million barrel draw. However, prices subsequently rebounded and ended the session up 1 per cent, as market participants deemed the selloff too severe and grew optimistic about the potential for interest rate cuts.
Nevertheless, the Federal Reserve’s interest rate trajectory is far from certain. U.S. services sector activity, which accounts for the vast majority of the country’s economic output, returned to growth in May after contracting in the previous month. This shift could potentially weaken the case for interest rate cuts.
Oil prices had also experienced downward pressure after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed on Sunday to extend most of their oil output cuts into 2025. However, they left room for voluntary cuts from eight members to be gradually unwound, beginning in October.
In the Middle East, tensions continue to simmer as Hamas leader Ismail Haniyeh stated on Wednesday that the militant group would demand a permanent end to the war in Gaza and Israel’s withdrawal as part of any ceasefire plan. This appears to be a rebuttal to a peace proposal put forward by President Joe Biden, while Israel announced a new military campaign against Hamas.
British security firm Ambrey reported on Thursday that a Greek-owned bulk carrier was allegedly targeted by Yemen’s Houthis while traveling northbound in the Red Sea. Despite these geopolitical risks, market fundamentals have recently taken precedence over such concerns, impacting oil price movements more significantly.
