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Crude oil futures climbed for a second straight session Thursday, as a tamer than expected U.S. inflation reading is seen raising the chances of a September interest rate cut by the Fed.
The U.S. government reported the consumer price index declined 0.1% in June, falling for the first time since May 2020, and core CPI – which excludes volatile food and energy prices – rose just 0.1%.
Analysts generally believe slower inflation and interest rate cuts should stimulate more economic activity, supporting higher oil prices.
“Although we have difficulty connecting a possible rate reduction with increased petroleum demand, favorable news on the inflation front would appear sufficient to maintain speculative interest in the long side of the energy futures,” Ritterbusch analysts wrote, according to Dow Jones.
Traders also weighed the latest monthly oil report from the International Energy Agency, which made minor changes in its demand growth outlook, raising the 2024 estimate by 10K bbl/day to 970K while trimming its 2025 forecast by 20K bbl/day to 980K.
Demand growth in Q2 slowed to 710K bbl/day, the lowest quarterly increase in more than a year, the IEA said, as oil consumption in China contracted in both April and May, while demand for industrial fuels and petrochemical feedstocks was particularly weak.
Front-month Nymex crude (CL1:COM) for August delivery settled +0.6% to $82.62/bbl, front-month Brent crude (CO1:COM) closed +0.4% to $85.40/bbl.
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Forecasts from the IEA remain well below the more bullish outlook of OPEC, which earlier this week left its forecasts for demand growth in 2024 and 2025 unchanged at 2.2M bbl/day and 1.8M bbl/day, respectively.
The IEA and OPEC demand forecasts are “wider apart than usual, partly due to the differences of opinion over the pace of the world’s transition to clear fuels,” StoneX analysts said, according to MarketWatch.