Oil Prices Rise Amid U.S. Economic Data

By Nicole Jao

Oil prices settled higher on Thursday after strong U.S. economic data stoked expectations for increased crude demand, yet gains were limited by concerns regarding lower oil imports from China.

Brent crude futures for September settled up 66 cents, or 0.81%, at $82.37 a barrel. U.S. West Texas Intermediate crude for September gained 69 cents, or 0.89%, to $78.28.

The U.S. Commerce Department revealed that the U.S. economy grew faster than anticipated in the second quarter while inflation eased, raising hopes that the Federal Reserve would lower interest rates in September. Lower interest rates typically spur economic activity, potentially increasing oil consumption.

Bob Yawger, director of energy futures at Mizuho in New York, commented, “The U.S. GDP data implied the economy is humming along at a pretty nice rate. It’s an indication that we’re going to have a ‘soft landing,'” referring to a scenario where inflation is controlled without a significant recession or surge in unemployment.

In contrast, China’s oil imports and refinery runs have declined in 2023 due to decreased fuel demand amid sluggish economic growth, according to government data. UBS analyst Giovanni Staunovo noted, “While Chinese economic data remains disappointing, we are starting to see larger oil inventory draws, which suggests supply growth lags demand growth.”

Earlier on Thursday, China’s central bank unexpectedly cut interest rates to support its weakening economy.

Both crude oil benchmarks experienced a drop of over $1 per barrel earlier in the trading session.

In Canada, wildfires are raging in the western provinces of British Columbia and Alberta, particularly near the oil sands hub of Fort McMurray, which produces 3.3 million barrels per day. Rain is forecast for the area later this week, alleviating supply concerns.

Additionally, efforts to reach a ceasefire to end the conflict in Gaza between Israel and Hamas have gained traction. A breakthrough could reduce supply threats, leading to lower prices.

John Evans, an analyst at oil broker PVM, stated, “With continued, and according to some sources, conciliatory developments in Gaza peace talks, oil prices are finding it increasingly hard to maintain intermittent rallies.”

On the ground, Israeli forces advanced deeper into towns on the eastern side of Khan Younis in southern Gaza, following remarks from Israeli Prime Minister Benjamin Netanyahu to U.S. lawmakers about actively working to bring hostages home.