Oil rises amid the expectation of a US rate cut

Tokyo — Oil prices rose for a fourth day on Tuesday on optimism the US Federal Reserve will this week cut interest rates for the first time in more than 10 years, which should support economic and fuel demand growth in the world’s biggest oil user.

Brent crude rose 33c, or 0.5%, to $64.04 a barrel by 4.35am GMT, after gaining 0.4% the previous session.

US crude was up 30c or 0.5%, at $57.17 a barrel, having risen 1.2% on Monday.

So-called dovish monetary policy in the US, where the central bank reduces interest rates, would “support a continuation in global expansionary activities and fuel demand growth” for the second half of 2019, Benjamin Lu, an analyst at Phillip Futures in Singapore, said in a note.

“If the Fed is a little more dovish and prices in a 75 basis points cut we might see oil pushing up towards $60,” Lu said, referring to US crude.

Still, “demand side concerns are the shadow over oil prices”, he added.

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 said a small rate cut “is not enough”.

Economic growth in the US 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.

US and Chinese negotiators meet this week for their first in-person talks since agreeing to a truce to their trade dispute at the Group of 20 meeting in June,  with some optimistic that the discussions will help bridge the gap between the world’s two largest economies and biggest oil consumers.

However, Trump said China might not want to sign a trade deal until after the 2020 US election.

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

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

Reuters