SINGAPORE- Oil extended gains from the previous session on Thursday amid growing expectations the Federal Reserve will cut interest rates in September, though prices were capped on the back of higher US inventories and an OPEC+ plan to increase supply.
Brent crude futures rose 31 cents, or 0.40 percent, to $78.72 a barrel, while US West Texas Intermediate crude futures climbed 41 cents, or 0.55 percent , to $74.48.
Nearly two-thirds of economists are now predicting an interest rate cut in September, according to Reuters’ May 31-June 5 poll, offsetting recent bearish supply news.
Lower interest rates decrease the cost of borrowing, which can incentivize economic activity and boost oil demand.
However, the Fed’s interest rate path is far from a foregone conclusion as US services sector activity, which accounts for the vast majority of the country’s economic output, returned to growth in May after a contraction in the previous month. That could potentially weaken the case for interest rate cuts.
The oil benchmarks were still headed for weekly declines of about 4 percent as of Thursday, weighed down by the latest supply decision from the Organization of the Petroleum Exporting Countries and allies.
The group agreed on Sunday to extend most of their oil output cuts into 2025, but left room for voluntary cuts from eight members to be unwound gradually, beginning in October.
