On Thursday, oil prices spiked after the European Central Bank (ECB) slashed rates, sparking hopes that the Fed will do the same in September.
The US West Texas Intermediate (WTI) July crude futures soared by 2.00% to $75.55 per barrel on June 06. Furthermore, industry watchers estimate a 0.16% climb to $75.67 a barrel in the coming market session.
Likewise, Brent oil futures for July delivery expanded by 1.86% to $79.87 a barrel, extending Wednesday’s gains. Moreover, market analysts predict a 0.06% surge to $79.92 per barrel in the following trading day.
During its June 06 meeting, the ECB reduced its benchmark interest rate by 25.00 basis points to 4.25%. Commodity specialists stressed that lower borrowing costs make black gold cheaper for foreign buyers, which boosts offshore demand.
In addition, EIA-monitored crude oil inventories added 1.23 million barrels in the week ending May 31. The report contrasted the draw of 4.16 million barrels the week before and the forecasted reduction of 2.10 million barrels.
During the same period, the API posted a build of 4.05 million barrels, reversing the 6.49-million-barrel shortfall in the week ending May 24. This unexpected accumulation defied the 1.90-million-barrel projected deficit, hinting that demand softened during the Labor Day weekend.
Fed Monetary Easing Will Reinforce Oil Demand
Oil investors welcomed the ECB’s decision, saying it may encourage the Fed to cut rates within the third quarter. According to financial experts, a looser policy will boost economic activity, driving energy consumption upward.
Speculators added that the recent cooling in the American labor sector highlights the need to reduce borrowing costs to stimulate growth. They emphasized that the economy only added 152,000 non-farm jobs in May, 12.14% lower than the forecasted increase of 173,000.
Lastly, Initial jobless claims rose to 229,000 in the week ending June 01, surpassing the upwardly revised 221,000 the week before. This reversed the predicted decline to 220,000, marking the highest reading since early May.