Oil Prices Rally Ahead of Expected Fed Rate Cuts: A 6% Monthly Surge?

In the latest trading sessions, oil prices in Asia witnessed a steady climb, preparing for a third consecutive weekly increase.

This uptrend is fueled by the anticipation that the U.S. Federal Reserve may soon begin to lower interest rates. Brent and WTI futures have experienced a nearly 2% rise this week, with a cumulative monthly increase surpassing 6%, effectively reversing the losses recorded earlier in May.

Market Dynamics and External Influences

Despite fundamentally weak conditions, oil prices have continued to ascend. ANZ analysts note, “Crude oil edged higher despite weak near-term fundamentals.”

This upward movement is partly due to a broader market shift towards risk-taking, stimulated by indicators of further weakening in the U.S. labour market.

Moreover, traders are increasingly confident about a forthcoming rate cut by the Fed, with the odds of a reduction in September jumping from 50% to 64% over the past month, as per the CME FedWatch tool.

Impacts on the Oil and Gas Forecast

The prospect of lowered interest rates is poised to heighten consumer demand for oil, potentially boosting the market further. Concurrently, oil production faces weather-related disruptions, notably in Ecuador where heavy rains have significantly cut output.

The U.S. Gulf Coast is also on high alert for potential cyclonic activity. Meanwhile, in Asia, refining margins have seen improvements, suggesting a continued rise in gasoline prices through August, although diesel is expected to face downward pressure.

Ivan Mathews, FGE’s head of Asia refining, commented, “We expect gasoline to continue rising through to August, offset by easing diesel cracks.”

Summary: Rising Oil Prices and Market Optimism

Oil prices have escalated in Asian markets, marking a potential third week of gains driven by anticipation of U.S. interest rate cuts.

This rise is supported by a stronger risk appetite among traders, reflecting a 6% monthly gain for Brent and WTI futures.

Despite challenges from weather disruptions and variable refining margins, the oil and gas market outlook remains robust, influenced by economic policies and consumer demand dynamics.

WTI Crude Oil Price Forecast

USOIL is trading at $82.23, up 0.58%. On the 4-hour chart, the pivot point is set at $81.97. Key resistance levels are at $82.45, $82.75, and $82.99, while immediate support is at $81.59, followed by $81.30 and $81.06.

The 50-day EMA stands at $81.17, and the RSI is at 66. A breakout above the double-top pattern could push prices toward $82.45, the 161.8% Fibonacci extension. The outlook remains bullish above the pivot point of $81.97, but a break below this level could trigger a sharp selling trend.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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