Oil Prices Rise as US Data Mitigates Fed Rate-Cut Outlook, According to Reuters

By Laila Kearney

NEW YORK (Reuters) – Oil prices saw a slight increase on Thursday amid fluctuating trade. The market faced pressure from rising fuel supplies and the anticipation of a delayed commencement to Federal Reserve interest rate reductions. However, support came from U.S. economic indicators showing a softer labor market and decelerating inflation.

By 1:12 p.m. EDT, Brent crude futures had risen by 31 cents, or 0.4%, reaching $82.91 a barrel. Meanwhile, West Texas Intermediate (WTI) U.S. crude futures climbed 25 cents, or 0.3%, to $78.75 a barrel. Both benchmarks had appreciated nearly 1% in the prior session.

Comments from the Organization of Petroleum Exporting Countries (OPEC) also contributed to the rise in crude prices. OPEC Secretary General Hathaim Al Ghais stated that demand could surge to 116 million barrels a day by 2045, potentially exceeding that figure as well. This was in response to an International Energy Agency report forecasting peak oil consumption by 2029, which Al Ghais criticized as "dangerous commentary" that could lead to significant energy market volatility.

In U.S. economic news, the Labor Department reported a 0.2% month-to-month decline in the producer price index (PPI) for final demand in May, contrary to economists’ predictions of a 0.1% increase. Additionally, weekly initial jobless claims rose more than anticipated, reaching a 10-month high.

On Wednesday, the Federal Reserve decided to maintain current interest rates and signaled that any policy easing could be delayed until December. In a press conference, Fed Chair Jerome Powell noted that inflation had decreased without significantly impacting the economy.

Jim Ritterbusch from Ritterbusch and Associates indicated that Powell’s remarks, which provided no clear timeline for rate reductions, added further pressure to the energy sector. Elevated borrowing costs typically restrain economic expansion and can diminish oil demand.

On the supply side, U.S. crude inventories increased more than expected last week due largely to a rise in imports, with fuel stockpiles also exceeding predictions, as reported by the Energy Information Administration.

Traders are closely monitoring ongoing discussions regarding a possible ceasefire in Gaza, which could alleviate concerns over oil supply disruptions in the region. In recent developments, Houthi militants, aligned with Iran, claimed responsibility for attacks on ships, including missiles targeting a Greek-owned coal vessel near Yemen’s Red Sea port.

This militant group has escalated attacks on international shipping in the Red Sea since November as an expression of support for Palestinians amid the conflict between Israel and Hamas.

U.S. Secretary of State Antony Blinken noted that the Palestinian group had suggested multiple changes to a U.S.-backed ceasefire proposal, with mediators actively working to bridge the gaps in the negotiations.