(London) Oil prices were moving in the green on Friday, driven by rising geopolitical tensions and the prospect of a slowdown in American inflation which could increase the probability of a rate cut this year, favourable to demand.
Published at 7:30 a.m.
Around 6:35 a.m. (Eastern time) (12:35 p.m. in Paris), the price of a barrel of Brent from the North Sea, for delivery in August, which is the last day of trading, increased by 0 .75% to $87.04.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery the same month, rose by 0.80% to 82.39 dollars.
By focusing on “risk,” investors are pushing up crude prices, DNB analysts say, particularly because of geopolitical tensions in the Middle East.
Fears of an extension of the war between Hamas and Israel have grown following an escalation of violence on the Israeli-Lebanese border and threats.
Attacks by Hamas-allied Hezbollah on Israeli positions and by the Israeli army on targets in Lebanon continued, with the Lebanese movement reporting the deaths of four fighters.
The market is also counting on an increase in seasonal demand, DNB experts add.
Furthermore, the PCE inflation index for May, the barometer favored by the American central bank to guide its monetary policy, is expected to slow slightly over one year, according to analyst consensus.
The figure is likely to show “weakening inflationary pressures in the US economy, increasing the likelihood of rate cuts later this year,” said SEB’s Bjarne Schieldrop.
However, a rate cut would be “positive for the economy and the markets in general” and therefore “for the demand for oil” and its price, concludes the analyst.
Usually a bearish factor, U.S. crude oil inventories rose sharply in the week ending June 21, according to the U.S. Energy Information Administration (EIA), but investors largely ignored the data, notes Tamas Varga of PVM Energy.
Analyst cites other “factors boosting oil prices,” such as “continued weather-related issues in Ecuador […] which eliminate 100,000 barrels per day of production.”
The country was in fact forced to suspend operations at several of its oil wells due to heavy rains.
