Oil Prices Rise in Asian Trade, Poised for Third Weekly Jump
In an exciting turn of events, oil prices surged in Asian trade on Friday and are on track for a third consecutive weekly increase. This surge is fueled by growing expectations that the US central bank will soon initiate interest rate cuts.
Brent Crude Futures on the Rise
Brent crude futures for August settlement saw a significant increase, rising 41 cents to $86.80 a barrel by 7:39 a.m. Saudi time. The Brent contract for September also experienced a boost, rising to $85.69 a barrel.
US West Texas Intermediate Crude Futures Follow Suit
US West Texas Intermediate crude futures for August delivery also saw a rise of 50 cents, reaching $82.24 a barrel.
Positive Week for Brent and WTI Futures
Both Brent and WTI futures have seen gains of almost 2 percent this week, with a monthly increase of slightly over 6 percent. This growth has managed to erase losses from earlier in May.
Market Analysts Weigh In
Analysts from ANZ noted that despite weak near-term fundamentals, crude oil prices continued to climb. They attributed this rise to a risk-on sentiment across the broader market triggered by data indicating further weakness in the US labor market.
Anticipated Fed Easing Cycle Sparks Market Optimism
Growing expectations of an impending Fed easing cycle have led to a risk rally in stock markets. Traders are now projecting a 64 percent chance of a first Fed cut in September, up from 50 percent a month ago.
Potential Impact of Interest Rate Cuts on Oil Demand
Easing interest rates could potentially boost oil demand from consumers, providing a potential boon for the oil market.
Weather-Related Disruptions and Refining Margins
Oil supplies have faced pressure from weather-related disruptions, with Ecuador’s production declining by 100,000 barrels a day due to heavy rains. Additionally, the US Gulf Coast could be impacted by adverse weather in the coming days.
On a positive note, a recovery in physical refining margins has buoyed markets. Singapore complex refining margins averaged $3.60 a barrel in June, showing improvement from May.
Expert Insights
Ivan Mathews, head of Asia refining at FGE, anticipates that refining margins will remain steady in the third quarter. While gasoline prices are expected to rise through August, diesel cracks may ease amid lengthening East of Suez balances.