Oil prices experienced a rise during Asian trade on Friday, positioning themselves for a third consecutive weekly increase. This uptrend is supported by growing expectations that the U.S. central bank will soon begin to cut interest rates and firm complex refining margins. Brent crude futures for August settlement, which are set to expire on Friday, increased by 48 cents, or 0.56%, reaching $86.87 a barrel by 0620 GMT. Meanwhile, the Brent contract for September saw a 0.53% rise to $85.71 a barrel. U.S. West Texas Intermediate crude futures for August delivery rose by 52 cents, or 0.64%, to $82.26 a barrel. Both Brent and WTI futures have seen nearly a 2% increase this week, with both benchmarks also on track for gains of just over 6% month-on-month.
ANZ analysts noted that “crude oil edged higher despite weak near-term fundamentals,” referring to unexpected gains in U.S. crude inventories despite expectations of a drawdown during the peak summer demand. Prices rose amid a risk-on tone across broader markets, triggered by data indicating further weakness in the U.S. labour market. Growing expectations of an imminent Fed easing cycle have sparked a risk rally across stock markets, with traders now pricing in a 64% chance of a first Fed cut in September, up from 50% a month ago, according to the CME FedWatch tool. Easing interest rates could boost oil demand from consumers.
Additionally, a recovery in physical refining margins supported markets, with the Singapore complex refining margins averaging $1 higher in June, compared to May, at around $3.60 a barrel. Ivan Mathews, head of Asia refining at FGE, expressed expectations that refining margins will remain around current levels heading into the third quarter. He anticipates gasoline prices to continue rising through August, though this will be offset by diesel cracks, which are expected to ease amid lengthening East of Suez balances.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
