Oil stabilizes as signs of economic slowdown clash with Fed rate cut hopes; Brent crude at $85.09/bbl

Oil prices were largely unchanged on Thursday as investors grappled with mixed signals on crude demand. Concerns about a potential economic slowdown in the US were balanced by rising expectations that the Federal Reserve may soon cut interest rates.

By 11:41 a.m. EDT (1541 GMT), Brent futures were up 1 cent at $85.09 a barrel, while U.S. West Texas Intermediate (WTI) crude was up 6 cents at $82. .91 dollars. Both benchmarks posted gains in the previous session.

“Crude oil prices recovered from key support levels, with NYMEX crude oil back from $79 to $79.50 and MCX crude above 6,700, both up more than 3.5% from recent lows, supported by a larger-than-expected draw in weekly US oil inventories – amid signs of higher demand and further supported by a weaker US dollar,” said Pranav Mer, VP – Research (Mate & Currency) BlinkX and JM Financial.

What is weighing on the price of crude oil?

The number of Americans filing new claims for unemployment benefits exceeded expectations last week. Initial claims for state jobless benefits rose by 20,000 to a seasonally adjusted 243,000 for the week ended July 1.

The data bolsters the case for the Fed to consider interest rate cuts as soon as this month, potentially boosting oil spending. However, rising jobless claims also point to an economic slowdown that could reduce demand for crude oil, according to John Kilduff, partner at Again Capital in New York.

Chinese economic growth has contributed to lower oil prices. On Thursday, Chinese leaders signaled their commitment to current economic policies, although details were limited. These signals tempered investors’ expectations of increased consumption efforts in the world’s second-largest economy.

However, anticipation of potential interest rate cuts by the US Federal Reserve prompted some trading activity and prevented oil prices from falling further.

Federal Reserve officials indicated on Wednesday that the US central bank is moving closer to a decision to cut interest rates, encouraged by improving inflation trends and a more balanced labor market. This development could pave the way for a rate cut in September.

According to a Fed report released Wednesday, U.S. economic activity showed mild to modest expansion from late May to early July, with companies anticipating slower growth in the near future.

Meanwhile, the European Central Bank (ECB) maintained its expected stance on Thursday, keeping interest rates unchanged. The ECB gave no indication of its future actions, citing high domestic price pressures and expectations that inflation will exceed its target by next year.