Oil up after US economic data strengthens rate cut expectations

NEW YORK – Crude prices edged up on Thursday after data showed a stabilizing US job market, fueling expectations that the Federal Reserve could begin to cut interest rates in autumn, which should stimulate the economy and boost oil demand.

Brent crude futures settled 52 cents, or 0.6%, higher at USD 83.27 a barrel, while US West Texas Intermediate crude (WTI) ended at USD 79.23, up 60 cents, or 0.8%.

The number of Americans filing new claims for unemployment benefits fell last week, pointing to an underlying strength in the labor market.

“Even though the jobless claims were low, the report was weak enough that it’s going to allow the Fed to get in and cut,” said John Kilduff of Again Capital. “The strong employment trends do portend strong gasoline demand as we look out, even though it has been lackluster.”

Wednesday’s slower-than-expected US inflation data for April also fed market expectations for a September cut in interest rates, which could temper dollar strength and make greenback-denominated oil more affordable for holders of other currencies.

Equities, which tend to move in tandem with oil prices, rose on the rate cut hopes, with the Dow reaching an all-time high of 40,000 for the first time.

Brent had touched an intra-day low of USD 81.05 on Wednesday – the lowest the front-month futures contract has traded since Feb. 26. It then rebounded after the inflation data and a government report showing a drawdown in US crude, gasoline, and distillate inventories last week due to a rise in both refining activity and fuel demand.

US gasoline demand, however, continued to land under 9 million barrels per day for a sixth straight week, below what is typical heading into the summer driving season, which officially kicks off on the Memorial Day weekend at the end of the month.

“This increase in the runs that will likely persist into early next month will be going head-to-head with continued weak product demand that is showing no sign of improvement,” said Jim Ritterbusch of Ritterbusch and Associates.

In the Middle East, Israel’s tanks pushed into the heart of Jabalia in northern Gaza on Thursday while, in the south, its forces pounded Rafah without advancing, Palestinian residents and militants said.

Ceasefire talks mediated by Qatar and Egypt are at a stalemate, with Hamas demanding an end to attacks and Israel refusing until the group is annihilated.

(Additional reporting by Noah Browning, Katya Golubkova in Tokyo and Emily Chow in Singapore; Editing by Marguerita Choy and Susan Fenton)