WTI, Brent rise for second day

A pump jack drills oil crude from the Yates Oilfield in West Texas’s Permian Basin, near Iraan, Texas, U.S., March 17, 2023. 

Bing Guan | Reuters

Crude oil futures rose about 2% on Thursday in a second consecutive day of gains, as the European Central Bank cut interest rates for the first time in five years and as traders bet the Federal Reserve will follow suit in September.

Oil prices closed more than 1% higher on Wednesday, snapping a losing streak triggered this week by the OPEC+ decision to increase supply later this year. The move higher Wednesday came after private payrolls came in much weaker than expected, boosting hopes that the Fed will slash rates.

Fed futures trading now suggests about a 70% chance that the central bank will cut rates in September. Lower interest rates bring the hope of more robust economic growth and stronger oil demand.

“The May private payroll data yesterday also suggested a slowing labour market much to the delight of the Federal Reserve,” Tamas Varga, an analyst at oil broker PVM, wrote in a Thursday note. “US equities climbed to fresh historic highs and the temptation was irresistible for oil, it faithfully followed.”

Here are Thursday’s closing energy prices:

  • West Texas Intermediate July contract: $75.55 a barrel, up $1.48, or 2%. Year to date, U.S. oil has gained 5.44%.
  • Brent August contract: $79.87 a barrel, up $1.46, or 1.86%. Year to date, the global benchmark has risen 3.67%.
  • RBOB Gasoline July contract: $2.39 a gallon, up 1.87%. Year to date, gasoline futures are up 14%.
  • Natural Gas July contract: $2.82 per thousand cubic feet, up 2.32%. Year to date, natural gas is up 12.2%.

Oil prices are still down about 2% this week after eight OPEC+ members led by Saudi Arabia and Russia agreed to phase out 2.2 million barrels per day in production cuts from October through September 2025.

But the recovery over the past two sessions may indicate that the oil market is finding a floor, said Ryan McKay, senior commodity strategist at TD Securities.

JPMorgan analysts said the sell-off was likely a reaction to the OPEC+ decision, though soft manufacturing data and the weak jobs data raised concerns about the U.S. economy as well.

However, Saudi Arabia and Russia may be willing to maintain their cuts through the end of the year if demand isn’t strong enough to absorb the additional barrels, the analyst said. Moreover, rising oil inventories are expected to shift to draws in the third quarter with the OPEC+ cuts remaining in place at least until October, according to JPMorgan.

“We think oil markets have overreacted to the mildly negative OPEC+ meeting outcome,” Barclays analyst Amarpreet Singh told clients in a Thursday note. “Demand indicators have certainly softened somewhat recently, but are not falling off a cliff, in our view.”

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