Brent gains on speculations of sooner-than-expected rate cut

The front-month ICE Brent contract gained $1.38/bbl on the day, to trade at $78.77/bbl at 09.00 GMT.

PHOTO: Oil pumpjacks. Getty Images

Upward pressure:

Brent futures moved higher amid growing speculations of a US Federal Reserve (Fed) interest rate cut in September, according to a Reuters report.

Several economists surveyed by Reuters anticipate an interest rate cut as early as this September. Lower interest rates make the greenback weaker for non-dollar holders, which can support demand growth for dollar-denominated commodities like oil.

Price-supportive policy decisions by OPEC+ have further supported the price of Brent crude, according to some market analysts.

The OPEC secretariat has confirmed that Iraq, Russia, and Kazakhstan will submit their respective compensation plans by the end of this month for surpassing their production quotas this year.

“The broader OPEC+ alliance also extended its formal production agreement until the end of 2025, which underpins the market over the next 18 months,” ING Bank’s senior commodity strategist Daniel Hynes said.

Downward pressure:

Some downward pressure acting on Brent futures arises from a weaker outlook on oil demand growth after the US Energy Information Administration (EIA) reported a build in crude stocks.

Commercial crude oil inventories in the US rose by 1.23 million bbls to 456 million bbls in the week ending 31 May. The rise was "unexpected,” according to Hynes.

“The official US weekly released on Wednesday had a bearish element with unexpected stock-builds,” VANDA Insights’ founder and analyst Vandana Hari said.

By Aparupa Mazumder

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