Oil found support as fresh US economic data came in strong

Brent's price gained after the US services sector activity saw a month-on-month expansion in July, the Institute of Supply Management (ISM) reported.

PHOTO: Oil pump jacks with the US flag in the background. Getty Images

The services or non-manufacturing purchasing managers (PMI) index, another key inflation ticker for the US Federal Reserve (Fed), moved up from 48.8% in June to 51.4% in July, the ISM reported.

“Economic activity in the services sector expanded in July,” it said.

This news has supported oil prices and eased some fears of a looming recession in the world’s biggest crude oil consumer.

A PMI reading above 50 indicates growth in economic health and an expansion in the services sector, which accounts for about two-thirds of the country’s economy. It can also support demand growth of commodities like oil.

“The US reported a rebound in July services sector activity on Monday, helping prop up [oil market’s] sentiment,” VANDA Insights’ founder and analyst Vandana Hari remarked.

Moreover, oil investors found comfort from the services PMI reading as it supported expectations of a September Fed rate cut. The US central bank recently reiterated its willingness to cut key interest rates if it sees steady growth in the country’s economy.

Lower interest rates boost demand, making dollar-denominated commodity prices more affordable for non-dollar holders.

By Aparupa Mazumder

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