By Adedapo Adesanya
The crude oil market appreciated by more than 1 per cent on Thursday, as expectations for a US interest rate cut increased further and eased recent worries, with Brent crude futures growing by $1.17 or 1.54 per cent to $77.22 a barrel and the US West Texas Intermediate (WTI) crude futures gaining $1.08 or 1.5 per cent to $73.01 a barrel.
Minutes of the US Federal Reserve’s July meeting released on Wednesday showed most of the central bank’s officials thought it was on track for an interest rate cut next month.
At the last meeting in July, US inflation stood at 3 per cent, while unemployment was at 4.1 per cent. Since then, inflation has fallen to 2.9 per cent, while unemployment has increased by 0.2 percentage points to 4.3 per cent.
Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen oil demand.
Analysts noted that for markets, the question is not whether the Federal Reserve cuts rates but whether it goes for a 25-basis-point cut or a larger 50-basis-point reduction.
The Chairman of the bank, Mr Jerome Powell, is due to speak on Friday at the annual central banking conference in Jackson Hole, Wyoming
The news also led to the sell-off of the Dollar, which is the currency that oil is priced in, so a weaker Dollar makes oil cheaper for holders of other currencies.
On Thursday, the US Labour Department said the number of jobless claims ticked up last week but appeared to be steadying near a level consistent with the gradual cooling of the labour market.
This could also set the stage for interest rate cuts.
Also supporting oil prices was a US government report on Wednesday showing crude, gasoline and distillate inventories falling by more than expected last week in the world’s largest oil producer, a sign of demand picking up.
In the Middle East, Iran-aligned Houthi militants continued attacks on international shipping in solidarity with Palestinians in the war between Israel and Hamas.
Investors are watching the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, which may reconsider its plan to gradually unwind some output cuts in October. OPEC+ has said the plan to raise output could be paused or reversed if needed.
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