Oil prices were flat on Tuesday after a European Central Bank (ECB) official hinted at a possible rate cut in September, balancing out the pressure from renewed hopes of a ceasefire in the Gaza conflict.
Brent crude futures for September rose 18 cents to $82.58 a barrel by 0947 GMT, while US West Texas Intermediate crude for September climbed 16 cents to $78.56 per barrel. This follows declines in oil prices over the previous two sessions.
European Central Bank Vice-President Luis de Guindos hinted at a potential interest rate cut in September, boosting investor sentiment as lower borrowing costs generally support oil demand and prices. Although the ECB left rates unchanged last week, President Christine Lagarde mentioned that the next meeting in September was “wide open,” with several policymakers considering more cuts as inflationary pressures ease.
“Oil is range-trading, only moderately up, and that support might come from most European stock markets in positive territory, benefiting from a risk-on environment,” said UBS analyst Giovanni Staunovo. In the US, some players are also betting on September rate cuts by the Federal Reserve.
Efforts to reach a ceasefire deal between Israel and militant group Hamas, under a plan outlined by US President Joe Biden in May and mediated by Egypt and Qatar, have gained momentum over the past month. Biden is expected to meet Israeli Prime Minister Benjamin Netanyahu on Thursday at the White House to discuss the ceasefire and other topics, including Iran.
The Gaza conflict has supported oil prices as investors consider the risk of potential disruptions to global crude supply. Meanwhile, traders have largely ignored Biden’s decision to call off his reelection bid and endorse Vice President Kamala Harris on Sunday. Citi analysts believe neither Harris nor Republican nominee Donald Trump would significantly impact oil and gas operations.
Weighing on prices, Morgan Stanley analysts expect fundamentals to balance out by the fourth quarter and rise to a supply surplus by next year. “Any further weakening of demand signals, combined with a resolution in Gaza, could lead to a further decrease in oil prices,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. She also noted that a recent swell in US inventories might indicate reduced demand.
The American Petroleum Institute, a trade group, is set to release its estimates for last week’s oil inventories on Tuesday at 4:30 p.m. local time (2030 GMT), with official US government data scheduled for Wednesday. A preliminary Reuters poll of six analysts estimated that US crude stocks fell by 2.5 million barrels in the week to July 19, while gasoline stocks likely dropped by 500,000 barrels.
Investors will also be watching the upcoming mini OPEC+ ministerial meeting on Aug. 1, which is unlikely to recommend changes to the group’s output policy, according to three sources who spoke to Reuters last week.
