Oil prices cool as supply concerns outweigh global tensions
SINGAPORE: Oil prices steadied on Thursday after a brief rally in the previous session, as worries over weak US demand and rising inventories overshadowed geopolitical tensions in the Middle East and Europe.
Brent crude futures inched up just 1 cent to $67.50 a barrel by 0156 GMT, while US West Texas Intermediate crude edged higher by 2 cents to $63.69.
Both contracts had gained more than a dollar on Wednesday following Israel’s strike on Hamas leadership in Qatar and NATO activity near the Ukrainian border.
Geopolitics and oil markets
The airstrike in Qatar came soon after Hamas claimed responsibility for a shooting in Jerusalem that killed six people. At the same time, Poland scrambled its own and NATO defences to intercept suspected Russian drones straying into its airspace during an attack on western Ukraine. It marked the first known instance of a NATO member firing shots in response to the war.
Despite the drama, analysts noted that neither incident posed an immediate risk to oil supply routes. Markets instead shifted their focus back to fundamentals, particularly signs of slowing fuel demand and swelling stockpiles in the United States.
Rising inventories weigh on prices
The US Energy Information Administration reported a 3.9 million-barrel build in crude inventories for the week ending September 5. Gasoline stocks also rose by 1.5 million barrels, defying expectations of a draw. The surprise increase pointed to softer demand at a time when producer prices and labour market data are already hinting at a cooling economy.
Central banks in focus
The latest economic signals have added to expectations that the US Federal Reserve will cut interest rates at its mid-September meeting. Analysts widely see a 25 basis-point reduction as likely, though some suggest a larger cut could be on the table.
Stephen Brown, deputy chief economist for North America at Capital Economics, wrote in a note that “easing labour market conditions mean the FOMC is set to vote for a 25bp cut next week … although a rare triple dissent in favour of a 50bp move could steal the headlines.”
Meanwhile, the European Central Bank is expected to keep its rates unchanged on Thursday, leaving markets watching for clues on its next steps.
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