(London) Oil prices were moving in the green on Friday, driven by rising geopolitical tensions and the prospect of a slowdown in American inflation which could reinforce the probability of a rate cut this year, favorable to the request.
At around 6:35 a.m. (Eastern time) (12:35 p.m. in Paris), the price of a barrel of North Sea Brent crude for delivery in August, the last day of trading, rose by 0.75% to $87.04.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery the same month, rose by 0.80% to 82.39 dollars.
By focusing on “risk,” investors are pushing up crude prices, DNB analysts say, particularly because of geopolitical tensions in the Middle East.
Fears of an extension of the war between Hamas and Israel have increased after an escalation of violence on the Israeli-Lebanese border and threats.
Attacks by Hamas-allied Hezbollah on Israeli positions and by the Israeli army on targets in Lebanon continued, with the Lebanese movement reporting the deaths of four fighters.
The market is also counting on an increase in seasonal demand, DNB experts add.
Furthermore, the PCE inflation index for May, the barometer favored by the American central bank to guide its monetary policy, is expected to slow slightly over one year, according to the consensus of analysts.
The figure is likely to show “weakening inflationary pressures in the US economy, increasing the likelihood of rate cuts later this year,” said SEB’s Bjarne Schieldrop.
However, a rate cut would be “positive for the economy and the markets in general” and therefore “for the demand for oil” and its price, concludes the analyst.
Usually a bearish factor, American crude oil stocks increased sharply during the week ended June 21, according to the American Energy Information Agency (EIA), but investors largely ignored this data, notes Tamas Varga, from PVM Energy.
Analyst cites other “factors boosting oil prices,” such as “continued weather-related issues in Ecuador […] which eliminate 100,000 barrels per day of production.”
The country was in fact forced to suspend operations at several of its oil wells due to heavy rains.