Americas News
Oil Traders Again Hopeful For Lower Bank Rates, But Demand Concerns Prevail
Oil prices on Thursday rose due to a resurgence of hope within the analytical community that central banks will lower their interest rates sooner than later, based on the latest slower than expected inflation data.
As of 1700 GMT, Brent was up 32 cents at $83.07 per barrel and West Texas Intermediate was up 44 cents to $79.07.
U.S. consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend at the start of the second quarter; also, data showed that retail sales were unexpectedly flat last month, possibly indicating that domestic demand is cooling and therefore amenable to the Federal Reserve's goal of providing a "soft-landing" for the economy.
The U.S. labour market was also said to be steadying, due to Washington disclosing that the number of Americans filing new claims for unemployment benefits fell last week by 10,000 to a seasonally adjusted 222,000.
John Kilduff, founding partner at Again Capital, said, "Even though the jobless claims were low, the report was weak enough that it's going to allow the Fed to get in and cut…..the strong employment trends do portend strong gasoline demand as we look out, even though it has been lackluster."
Still, analysts were concerned by gasoline demand in the U.S. continuing to land under 9 million barrels per day (bpd) for a sixth straight week, according to Energy Information Administration figures.
Jim Ritterbusch, president of Ritterbusch and Associates, remarked in reference to shrinking stockpiles as well as demand, "This increase in the runs that will likely persist into early next month will be going head to head with continued weak product demand that is showing no sign of improvement."
Warren Patterson, head of commodities strategy for ING Groep, was similarly cautious about the state of oil trading moving forward: while he agreed that "Recent macro data from the US has raised expectations that the Fed could start cutting rates soon, which will be providing some support to oil," he stressed that the market remains range-bound, and needs either clarity on policy from the Organization of the Petroleum Exporting Countries (OPEC) or a fresh catalyst to break out.
In other oil news, Reuters reported that a fading war risk premium was amongst a host of reasons why traders last week slashed their bullish bets on crude at the fastest pace in over a year.
The net long position—the difference between bullish and bearish bets—dropped to a three-month low as money managers liquidated longs, also prompting technical selling that pushed Brent to the low $80s and WTI to below $80 per barrel so far in May.
