Crude oil prices were set for a weekly increase today as optimism returned to the oil market following the release of some better-than-expected reports on the US economy.
One of them was the retail sales report for July, which showed a 1% increase, while expectations were for a 0.3% improvement, Reuters reported. The increase was all the more significant as it followed a monthly decline of 0.2% in June.
The other report was weekly jobless claims, which were lower than expected. There were 7,000 fewer new claims in the week ending August 9 than in the previous week.
“US economic data released this week helped to allay fears of a sharp slowdown in the US economy,” FGE told Reuters.
The latest data is also likely to boost hopes that the Fed will soon begin cutting interest rates, which is seen as a key potential boost to oil demand. On the other hand, the Fed has repeatedly signaled that it will not rush into rate cuts, meaning those hopes could still be dashed.
The strength in oil benchmarks is notable because a variety of bearish factors are weighing on the commodity. The main bearish factors are signs of weaker Chinese oil demand and two global demand revisions released this week by OPEC and the International Energy Agency.
Meanwhile, the risk of escalation remains in the Middle East as Israel continues to bomb Gaza and Iran continues to bide its time. Israel began talks with international mediators this week about a possible ceasefire, but what that would achieve remains unclear as Hamas is boycotting the talks.
“Geopolitics and the risk of escalating conflict in the Middle East are supporting prices as threats of retaliation grow louder,” Tim Snyder, chief economist at Matador Economics, told Reuters on Thursday.
By Irina Slav for Oilprice.com
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