Brent crude and the U.S. benchmark West Texas Intermediate (WTI) saw gains on Thursday, driven by escalating tensions between Israel and Lebanon and bolstered by positive jobs data in the U.S. Despite signs that the U.S. jobs market is cooling, first-time unemployment claims dropped last week, sparking optimism.
Market Movements
Brent crude reached a seven-week high on Thursday, trading up 0.62% at $85.60 per barrel as of 2:15 p.m. ET. This rise was partially attributed to the latest jobs data, which fueled hopes of a rate cut by the Federal Reserve later this year. WTI crude also increased, trading up 0.71% at $81.15 per barrel, marking a 58-cent gain for the day.
Economic Indicators
Last week, the Federal Reserve kept interest rates unchanged but signaled a potential rate cut in 2024, with more reductions anticipated in subsequent years. This decision followed new inflation data revealing a significant slowdown in consumer price increases for May, indicating that inflation pressures are easing.
On Thursday, the Bank of England (BoE) also decided to maintain its key interest rate at a 16-year high of 5.25%. This was the BoE’s final meeting before the UK elections on July 4. BoE Governor Andrew Bailey remarked, “We need to be sure that inflation will stay low, and that’s why we’ve decided to hold rates at 5.25% for now,” describing the decision as “good news” according to Reuters.
Oil Supply Forecast
Amid the ongoing debate about global oil demand, Rystad Energy projected a slowdown in global oil supply growth for 2024 and potentially 2025. This forecast is influenced by the extension of OPEC+ voluntary production cuts and the cartel’s demand outlook. Based on the latest OPEC+ guidance, Rystad indicated that global oil supply growth might be negligible in 2024, potentially making it the first year since 2020 with no supply growth.
Geopolitical Impact
The current surge in oil prices is significantly influenced by rising geopolitical tensions in the Middle East. The situation between Israel and Lebanon is deteriorating, raising fears of a broader conflict. This tension has historically been a catalyst for crude price increases, reflecting market concerns over potential supply disruptions in the region.
Conclusion
The interplay of Middle East tensions, U.S. economic data, and global oil supply projections continues to shape the oil markets. As stakeholders monitor these developments, the oil sector remains on a cautious yet optimistic trajectory.
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