Oil prices experienced a slight dip, consolidating their gains from the week, but could rebound strongly with the decline in U.S. inventories, the weakness of the dollar, and forecasts of interest rate cuts by the Federal Reserve (Fed).
Brent and WTI Prices
Around 10:10 GMT (12:10 in Paris), the price of a barrel of Brent North Sea crude for September delivery fell 0.53% to 86.88 dollars.
Its American equivalent, the barrel of West Texas Intermediate (WTI), for August delivery, decreased by 0.60% to 83.38 dollars.
Low Trading Volumes and Consolidation
“Volumes are expected to be low due to July 4th,” a holiday weekend in the United States due to the American national holiday, warn analysts at DNB.
“In the absence of significant news,” oil prices are taking a breather and consolidating their recent gains, they continue.
Both global crude benchmarks are trading near their highest levels since late April.
Factors Affecting Oil Prices
For Tamas Varga, an analyst at PVM Energy, several factors are hindering the upward momentum of crude prices, starting with the economic health of the Old Continent.
On Wednesday, the final PMI figures for the eurozone were slightly better than expected in June but remain down from the previous month.
In parallel, investors remain attentive to the second round of the French legislative elections, although the numerous withdrawals of candidates against the far right make an absolute majority for the National Rally less likely.
Potential for $90 Oil
However, Tamas Varga asserts that oil prices could “soon” surpass the $90 mark if U.S. crude inventories continue to decline and the dollar remains weak “due to forecasts of rate cuts” by the Fed.
Commercial crude oil inventories plunged by 12.2 million barrels during the week ending June 28, according to figures released Wednesday by the U.S. Energy Information Administration (EIA), a period marked by a rebound in demand.
Improved Demand Outlook
Analysts also mention an improvement in the demand outlook with the summer season marked by numerous trips, hence a high consumption of gasoline.
In the United States, “a series of discouraging economic data has significantly improved investor sentiment,” emphasizes Mr. Varga, such as employment figures or activity in the services sector declining in June.
This cooling of the economy raises hopes for a Fed rate cut in September and thus weighs on the dollar.
A depreciation of the U.S. currency encourages purchases of dollar-denominated oil, increasing the purchasing power of buyers using other currencies.