Crude oil continues to advance for the third day in a row through both crude oil, Brent and West Texas Intermediate, which rose by 0.35% and 0.56% respectively, thus reaching their highest levels in a week.
These gains come despite the absence of key data stimulating the markets.
This is because most of the figures, especially from the United States, indicated the continued expansion of the economy, but they were ultimately causing pressure on oil prices, as they stoked fears about the possibility of keeping interest rates higher for longer, and this is what actually happened.
According to the CME FedWatch Tool, the possibilities of lowering the interest rate during the coming September and November have declined in light of the positive data, statements and minutes of the monetary policy makers’ meeting. While these hopes revived slightly today, after the prolonged holiday in the US markets, which may contribute to enhancing the gains in the energy market.
This week features a number of important data with the gross domestic product in the US, with expectations that the advanced reading will be revised from growth of 1.6% in the first quarter to 1.3%, which represents a noticeable slowdown from 3.4% in the previous fourth quarter. It is also expected that weekly unemployment claims will rise again and pending home sales will remain unchanged in April, in addition to an expected slight growth in manufacturing activities in China.
On the other hand, withdrawals from crude inventories in the US are expected to return, and the annual core PCE reading is expected to hold steady at 2.8% and monthly growth to slow from 0.3% to 0.2%.
As for the beginning of next week, we will witness the decision of the Organization of the Petroleum Exporting Countries and its ally Russia (OPEC+) regarding oil production levels during the coming months. While current production levels are not expected to be changed, this may not be enough to provide sufficient support to prices with the surplus supply, which may be exacerbated by the acceleration of crude production by Iran, reaching its highest levels in years.
As for the geopolitical front, I do not expect it to continue to provide support to prices, given the absence of fears, so far, of the conflict expanding beyond its borders to reach a regional war. While the clashes between Israel and Egypt may awaken these fears, I completely rule out that this will ignite a widespread war.
