Oil Extends Gains After Bullish US Macro Data Raises Fed Rate Cut Expectations; Brent is approaching $84

Oil futures rose on Thursday on a settling U.S. labor market and slower-than-expected inflation data, raising expectations that the Federal Reserve will begin cutting interest rates in the fall.

Brent crude futures were up 32 cents at $83.07 a barrel by 1 p.m. EDT (1700 GMT). U.S. West Texas Intermediate (WTI) crude gained 44 cents to $79.07.

The number of Americans filing new jobless claims fell by 10,000 last week to a seasonally adjusted 222,000, the US Labor Department said, pointing to both underlying strength and a strengthening labor market.

“Even though jobless claims were low, the report was weak enough that it will allow the Fed to come in and cut,” said John Kilduff of Again Capital LLC. “Strong employment trends portend strong demand for gasoline as we look, although it has been weak.”

Meanwhile, U.S. consumer prices rose less than expected in April, a boost to financial market expectations for a September interest rate cut by the Federal Reserve that could temper the dollar’s strength and make oil more accessible to holders of other currencies.

Brent had hit an intraday low of $81.05 on Wednesday – the lowest the front-month futures contract has traded at since February 26 – but recovered about 0.5% higher on the day, based on mixed data on US oil inventories, which limited oil prices.

U.S. crude oil, gasoline and distillate inventories fell, reflecting an increase in both refining activity and demand for the fuel, Energy Information Administration (EIA) data showed.

Crude stockpiles fell 2.5 million barrels to 457 million barrels in the week ended May 10, the EIA said, compared with a forecast of 543,000 barrels by analysts in a Reuters poll.

However, gasoline demand continued to reach below 9 million barrels per day for the sixth straight week, below what is usual for the summer season.

“This increase in circulation that is likely to persist into early next month will run head-on against continued weak product demand, which shows no signs of improvement,” said Jim Ritterbusch of Ritterbusch and Associates.

In the Middle East, Israeli tanks pushed into the heart of the northern Gaza town of Jabalia on Thursday, while in the south its forces pounded Rafah without advancing, Palestinian residents and militants said.

Ceasefire talks brokered by Qatar and Egypt are deadlocked, with Hamas demanding an end to attacks and Israel refusing until the group is annihilated.