Oil prices climbed in Asian trading on Friday, marking a third consecutive weekly increase. This rise is driven by growing expectations that the US central bank will soon lower interest rates, coupled with strong complex refining margins. Brent crude futures for August, which are set to expire on Friday, increased by 48 cents, or 0.56%, reaching $86.87 per barrel by 0620 GMT. Meanwhile, the Brent contract for September saw a rise of 0.53%, settling at $85.71 per barrel. Similarly, US West Texas Intermediate (WTI) crude futures for August delivery went up by 52 cents, or 0.64%, to $82.26 per barrel.
So far this week, Brent and WTI futures have nearly gained 2%, with both benchmarks on course for a monthly gain of just over 6%. According to analysts at ANZ, “Crude oil edged higher despite weak near-term fundamentals,” referring to the unexpected increase in US crude inventories when a drawdown was anticipated during the summer peak demand. The analysts also noted that prices have risen amid a “risk-on” tone in the broader market, influenced by data indicating further weakness in the US labour market.
The growing anticipation of an imminent easing cycle by the Federal Reserve has sparked a risk rally across stock markets. Traders are now predicting a 64% likelihood of the first Fed rate cut in September, up from 50% a month ago, according to the CME FedWatch tool. Lower interest rates could benefit the oil market by boosting consumer demand.
Additionally, a recovery in physical refining margins has supported the market. The Singapore complex refining margins averaged $1 higher in June compared to May, reaching around $3.60 per barrel. Ivan Mathews, head of Asia refining at FGE, commented, “Heading into the third quarter, we expect refining margins to remain around current levels. We anticipate gasoline prices to continue rising through August, though this will be offset by easing diesel cracks amid lengthening East of Suez balances.”
Union Jack Oil plc (LON:UJO) is an onshore oil and gas exploration company with a focus on drilling, development and investment opportunities in the United Kingdom hydrocarbon sector.
