Oil prices rise despite oversupply concerns

Yahoo

2 days ago

Oil prices rose on Thursday morning, as investors looked past concerns about oversupply and economic growth.
Brent crude futures (BZ=F) climbed 0.5% to $65.15 a barrel, while West Texas Intermediate futures (CL=F) declined 0.3% at $63.04 a barrel.
Earlier on Thursday morning, Hargreaves Lansdown senior equity analyst Matt Britzman said oil prices had "weighed down by growing concerns of a global oversupply".
Read more: FTSE 100 LIVE: Stocks rise as traders await ECB interest rate decision
"Saudi Arabia is pushing for a major increase in oil production and has slashed prices for Asian buyers, signalling weaker demand," he said.
The July price cut by Saudi Arabia, which is the world's biggest oil exporter, comes after the decision from the Organization of the Petroleum Exporting Countries and their allies — known as OPEC+ — over the week to increase output next month.
In addition, Britzman said "ongoing trade tensions are adding to market uncertainty". There are concerns that a slowdown in the global economy due to US president Donald Trump's tariff agenda would weigh on demand for fuel.
The pound edged higher against the dollar (GBPUSD=X) on Thursday morning, rising 0.1% to trade at $1.3564 at the time of writing.
The US dollar index (DX-Y.NYB), which measures the greenback against a basket of six currencies, hovered around the flatline at 98.85.
This followed weak US economic data on Wednesday, including a sharp slowdown in private sector hiring growth, as well as a contraction in services sector.
On the back of the weak data from ADP's private sector jobs report, US president Donald Trump renewed his call for Federal Reserve chair Jerome Powell to lower interest rates. In a post on Truth Social on Wednesday, referencing the ADP report, Trump said that "Powell must now LOWER THE RATE. He is unbelievable!!!"
Jim Reid, market strategist at Deutsche Bank (DBK.DE), said: "Both the ADP and the ISM services prints led investors to price in more rate cuts this year, with clear moves in response to the two prints."
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"In fact by the close, futures were pricing in 58bps (basis points) of rate cuts by the Fed's December meeting, up +8.0bps on the day, and the highest number in over three weeks. And there's growing confidence that we'll see the first rate cut by September, with futures now almost fully pricing (97%) one by that meeting."
Attention now turns to the European Central Bank's (ECB) latest decision later on Thursday, with another rate cut expected to be announced.
Hargreaves Lansdown's Britzman said: "Investors are all but certain the European Central Bank will cut rates later today down to 2%. Hopes for easing grew after Eurozone inflation dipped to 1.9% in May, just below the ECB's target.
"More cuts are on the cards too, with interest rates expected to fall to 1.5% by the end of the year — low enough to start actively supporting the economy."
Ahead of the decision, the pound was slightly higher against the euro (GBPEUR=X), up 0.1% at €1.1882 at the time of writing.
Gold prices were muted on Thursday morning, as investors weighed weak economic data and the latest developments on trade.
Following talks between the US and European Union (EU) in Paris on Wednesday, EU trade commissioner Maroš Šefčovič tweeted: "We're advancing in the right direction at pace — and staying in close contact to maintain the momentum."
Meanwhile, US trade representative Jamieson Greer said in a statement that he was "pleased that negotiations are advancing quickly."
Read more: Bank of England governor expects interest rates and pay to decrease this year
At the same time, trade tensions remain high between the US and China, with Trump having said in a post on Truth Social in the early hours of Wednesday that it was "extremely hard" to reach a deal with China's president Xi Jinping.
The different signals on trade negotiations kept gold prices steady. Gold futures (GC=F) traded at $3,307.80 per ounce at the time of writing, while the spot gold price hovered around $3,374 per ounce.
In broader market movements, the UK's FTSE 100 (^FTSE) was also little changed on Thursday morning, trading at 8,799 points. For more details, on broader market movements check our live coverage here.
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