Oil prices rise on expectations of interest rate cuts despite supply concerns

(MENAFN) During early Thursday trading, oil prices continued their upward trajectory from the previous session, buoyed by growing anticipation of a potential interest rate cut by the Federal Reserve in September. However, gains were tempered by concerns over rising US inventories and the OPEC+ alliance's plan to increase oil supplies.

In terms of price action, Brent crude futures rose by 31 cents, or 0.40 percent, to USD78.72 per barrel, while US West Texas Intermediate crude futures increased by 41 cents, or 0.55 percent, to USD74.48.

The market sentiment was influenced by expectations of an interest rate cut in September, with nearly two-thirds of economists foreseeing such a move, according to a recent poll. Lower interest rates typically reduce borrowing costs, potentially stimulating economic activity and boosting oil demand.

However, uncertainty looms over the path of US interest rates, as the service sector, a significant contributor to the country's economic output, rebounded in May after contracting the previous month. This could weaken the rationale for lowering interest rates.

Despite the positive sentiment regarding interest rates, oil prices faced downward pressure due to supply-related developments. Both Brent and WTI benchmarks were on track for a weekly decline of around four percent until Thursday, primarily influenced by OPEC+'s decision on oil production cuts.

OPEC+ recently agreed to extend most of its production cuts until 2025, while gradually easing voluntary cuts by eight members starting in October. Additionally, Saudi Arabia's decision to lower the official selling prices for crude in July, coupled with data from the US Energy Information Administration indicating a rise in crude inventories by 1.2 million barrels in the week ending May 31, added to supply concerns.

These factors collectively contributed to the mixed performance of oil prices during Thursday's trading session, as the market weighed rate cut expectations against supply-related uncertainties. 

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