Oil Prices End Week Higher on Rate Cut Hopes and Stimulus from China

Oil Prices Rebound on Positive Economic Indicators

The oil market saw a positive end to the week as oil prices settled higher on Friday. Signs of slowing U.S. inflation raised hopes for a potential rate cut, while China’s rollout of more stimulus added to optimism for increased demand.

Price Movements

By 14:30 ET (19:30 GMT), Brent crude rose by 0.8% to $83.92 a barrel, and WTI crude gained 0.9% to $79.57 a barrel. Both contracts closed the week with gains of nearly 1%, driven partly by softer-than-expected U.S. inflation data.

Inflation and Rate Cut Expectations

The April CPI reading prompted expectations of a rate cut by the Federal Reserve, potentially starting as early as September. Looser monetary conditions could boost crude demand, although some Fed officials expressed caution, stating that more evidence of falling inflation is needed before adjusting rates.

Market Reports and Forecasts

Baker Hughes reported a slight increase in the weekly U.S. rig count, adding to market sentiment. Ahead of the release of CFTC positioning data, which will indicate appetite for bullish bets on oil, the positive momentum in oil prices is evident.

Global Demand Outlook

Crude markets received mixed signals on demand this week. While a significant draw in U.S. inventories suggested improving demand, the International Energy Agency slightly reduced its annual demand forecast due to economic uncertainties.

OPEC’s Production Policy

OPEC is expected to maintain its current production cuts beyond June, tightening the supply outlook. Analysts predict an extension of these cuts by at least three months, reflecting a proactive approach to market conditions.

China’s Economic Indicators

China’s move to issue a $1 trillion bond as fiscal stimulus underlines efforts to bolster its economy. Despite signs of a manufacturing sector recovery, weak consumption poses challenges. Expectations are high for policy adjustments to support housing and sustain economic growth.

(Peter Nurse, Ambar Warrick contributed to this article.)