Oil prices held steady on Friday after key U.S. inflation data for May came in largely in line with expectations, raising hopes that the Federal Reserve could start cutting interest rates this year.
Oil prices remain stable
Brent crude futures for August were up 0.4 percent at $86.73 a barrel, while West Texas Intermediate (WTI) crude futures were up 0.4 percent at $82.06, Reuters reported.
- Brent and WTI crude futures are up nearly 2% this week.
- The US personal consumption expenditures (PCE) price index remained stable, in line with expectations.
- The reaction of the financial markets was minimal.
Expectations of Federal Reserve easing
Rising expectations of an imminent Federal Reserve easing cycle have led to a spike in risk in stock markets. According to CME’s FedWatch tool, traders now rate the possibility of a first Fed rate cut in September at 64%, compared to 50% a month ago.
- Easing interest rates could be beneficial for oil as it would increase consumer demand.
Future estimates
Brent crude prices will remain around $90 a barrel in the coming months, according to Barclays analyst Amarpreet Singh. However, a Reuters poll suggests oil prices may not change much in the second half of 2024, with concerns about Chinese demand and the prospect of increased supply from major producers offsetting geopolitical risks.
- Brent crude oil is expected to average $83.93 per barrel in 2024, while US crude oil would average $79.72, according to the survey.
