Oil Prices on the Rise
The price of oil is on the rise on Friday, with signs of easing inflationary pressure in the world’s largest consumer of “black gold” – the USA, according to Reuters.
Prices of Brent crude oil futures are up by 33 cents, or 0.4%, to $85.73 per barrel. Meanwhile, futures on American crude oil West Texas Intermediate (WTI) have increased by 46 cents, or 0.6%, to $83.08 per barrel.
Oil Prices Show Signs of Decrease
Oil prices have been on the rise in the past two sessions, but are still on track to mark a weekly decline. Brent is expected to decrease by about 1% on a weekly basis after four weeks of price increase. Meanwhile, WTI futures remain stable on a weekly basis, with only a slight decrease of 0.1%.
Investor Confidence Boosted by Decrease in Consumer Prices
Investor confidence was supported after data released on Thursday showed that consumer prices in the US have decreased in June. This fueled hopes that the Federal Reserve will soon lower interest rates. Lower interest rates are expected to stimulate economic growth and investment.
The impact of interest rates on fuel consumption
Interest rates can have a significant impact on economic growth, which in turn affects fuel consumption. Lower interest rates can stimulate economic activity, leading to increased consumption of fuel as businesses expand and individuals have more disposable income to spend on transportation.
However, the market is still waiting for clearer signs of action. Although Federal Reserve Chairman Jerome Powell recently acknowledged the trend towards easing price pressures, he told Congress that more data is needed to support arguments for easing monetary policy.
“Cooling inflation data could support the Fed’s arguments to begin the process of reducing borrowing costs sooner rather than later,” he said.
Impact of Rising Fuel Demand in the USA
Recent reports indicate a significant increase in fuel demand in the USA, leading to a rise in prices. According to market strategist Yeap June Rong, this surge in demand is accompanied by a series of negative surprises in other reports, pointing to a clear weakening of the American economy.
Strong Fuel Demand Signals
Indications of strong fuel demand during the summer in the USA are also supporting the upward trend in prices. For the week ending on July 5th, gasoline demand in the USA reached 9.4 million barrels per day, the highest level for the week including Independence Day, since 2019. Demand for jet fuel also saw a significant increase, indicating a potential recovery in the travel industry.
The Strong Demand for Fuel Boosts US Refineries
The average base in the US has been the strongest since January 2020. The strong demand for fuel has encouraged refineries in the US to increase their activity and tap into crude oil reserves. The net intake of crude oil from refineries along the Gulf Coast in the US rose last week to over 9.4 million barrels per day for the first time since January 2019, according to government data.
*Data is current as of 9:00 AM Bulgarian time.
