Oil prices rise for fourth day on hopes of US Fed rate cut

London — Oil prices rose for a fourth day on Tuesday on optimism that the US Federal Reserve will, this week, cut interest rates for the first time in more than 10 years, supporting fuel consumption in the world’s biggest oil user.

Brent crude rose 56c to $64.27 a barrel by 9.06am GMT. It is set for a monthly fall of more than 3%, however, due to lingering worries about oil demand. US crude was up 44c at $57.31 a barrel, but also set for a monthly decrease of about 1.8%.

“Price support was provided by the resumption of the US-China trade talks and by the general belief that the US Federal Reserve will cut interest rates,” PVM analysts said in a note.

While the Bank of Japan held off on expanding stimulus on Tuesday, it signaled its readiness to do so “without hesitation” if a global slowdown jeopardises the country’s economic recovery.

US central bankers will begin their two-day meeting later on Tuesday and are expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago. US President Donald Trump has said a small rate cut “is not enough”.

Economic growth in theUS slowed less than expected in the second quarter, strengthening the outlook for oil consumption but, elsewhere, disappointing economic data has increased concerns about slower growth.

American and Chinese negotiators also meet this week for their first in-person talks since agreeing to a truce to their trade dispute at a G20 meeting last month. However, expectations for progress during the two-day Shanghai meeting are low, so officials and businesses hope Washington and Beijing can at least detail commitments for “goodwill” gestures and clear the path for future negotiations.

Supply risks are still a concern as tensions remain high around the Strait of Hormuz, through which about a fifth of the world’s oil passes.

BP has not taken any of its own oil tankers through the strait since a July 10 attempt by Iran to seize one of its vessels, the British company’s CFO Brian Gilvary said on Tuesday.

Tensions spiked between Iran and the West after Iranian commandos seized a British-flagged oil tanker in the Gulf this month in apparent retaliation for the capture of an Iranian tanker by British forces near Gibraltar.

Reuters

Source: businesslive.co.za