Oil prices saw a modest rebound on Thursday, with Brent crude futures rising to $79.93 a barrel and US West Texas Intermediate crude reaching $77.19 per barrel. This rebound came after a 1% drop on Wednesday, triggered by unexpected US crude inventory gains and easing concerns about a wider Middle East conflict.
Wednesday’s release of the US consumer price index (CPI) data, revealed a lower-than-expected inflation of 2.9% in July, the lowest since March 2021. This figure, primarily driven by a rise in housing-related costs, with food and energy prices remaining relatively stable, further solidified expectations of a potential interest rate cut by the Federal Reserve. Wednesday’s data supported Tuesday’s PPI release which came in softer than expected, with U.S producer pricing power also diminishing- a tell-tale sign of waning inflationary pressure.
Source: U.S Bureau of labor statistics
Middle-east and China to have a say
Geopolitical tensions surrounding Iran's potential response to the killing of the Hamas leader last month added further support to prices. Three senior Iranian officials have indicated that only a ceasefire deal in Gaza would prevent Iran from retaliating directly against Israel. This uncertainty has led to increased options trading activity as market participants seek protection against significant price increases.
However, concerns about slower global demand, particularly in China, tempered the gains. China's factory output growth slowed in July, while refinery output decreased for the fourth consecutive month, highlighting the country's uneven economic recovery. Earlier this week, the International Energy Agency revised its 2025 estimate for oil demand growth downward, citing the impact of a weakened Chinese economy on consumption. OPEC also cut its expected demand for 2024 due to similar concerns.
The oil market remains in a state of flux, with various factors influencing prices. While optimism about potential US interest rate cuts and geopolitical risks provided some support, worries about slower global demand, especially in China, continued to weigh on the market. The US consumer price index (CPI) data, showing a lower-than-expected increase of 2.9%, offers much needed clarity with a potential rate cut firmly on the table.
This closer proximity to the Fed's 2% target could have a mixed impact on oil prices. Like a swinging pendulum, lower interest rates could both weaken the US dollar, making oil more affordable for buyers using foreign currencies and potentially boosting demand, while also signalling a slowdown in the US economy, which could dampen oil demand. The interplay of these factors will influence oil prices in the coming days, with all eyes remaining on developments in the Middle East and their potential impact on an already volatile environment.
Oil technical analysis: Will the rally hold?
At the time of writing, oil prices are edging up at around $79.67, though some sell-side pressure is evident as prices stay below the 100-day moving average. Upward volatility could be tempered as the flat midline RSI suggests waning momentum. A move up could find resistance at the $81 psychological level, with a breach past that wall likely to find resistance at the $81.77 mark. On the downside, a dip below current levels could find support at the $79.24 mark and the $78 psychological level.
Source: Deriv MT5
The information contained within this article is for educational purposes only and is not intended as financial or investment advice. It is considered accurate and correct at the date of publication. Changes in circumstances after the time of publication may impact the accuracy of the information. The performance figures quoted refer to the past, and past performance is not a guarantee of future performance or a reliable guide to future performance. No representation or warranty is given as to the accuracy or completeness of this information. Do your own research before making any trading decisions.
Recommended Content
Editors’ Picks
![EUR/USD stays below 1.1200 after upbeat US data](https://editorial.fxstreet.com/images/Markets/Currencies/Majors/EURUSD/money-59004818_XtraSmall.jpg)
EUR/USD stays below 1.1200 after upbeat US data
EUR/USD stays below 1.1200 in the American session on Monday. The data from the US showed that Durable Goods orders rose at a much stronger pace than expected in July, supporting the USD and not allowing the pair to stage a decisive rebound.
![GBP/USD fluctuates near 1.3200 amid cautious market mood](https://editorial.fxstreet.com/images/Markets/Currencies/Crosses/GBPCAD/cash-346315_XtraSmall.jpg)
GBP/USD fluctuates near 1.3200 amid cautious market mood
GBP/USD is off multi-month highs, consolidating gains near 1.3200 on Monday. Better-than-forecast Durable Goods Orders data from the US and the cautious market stance helps the US Dollar hold its ground and limits the pair's upside.
![Gold retains gains above $2,500, higher highs at sight](https://editorial.fxstreet.com/images/Markets/Commodities/Metals/Gold/stacks-of-gold-bars-19033163_XtraSmall.jpg)
Gold retains gains above $2,500, higher highs at sight
Gold retreats from the daily high it set above $2,520 but manages to stay afloat above $2,500 on Monday. The 10-year US yield stabilizes near 3.8% and the US Dollar benefits from the negative shift seen in risk sentiment, making it hard for XAU/USD to stretch higher.
![Three fundamentals for the week: Focus on the fragility of the US economy](https://editorial.fxstreet.com/images/Macroeconomics/EconomicIndicator/Employment/NFP/american-dollar-bills-on-a-stars-and-stripes-flag-28691402_XtraSmall.jpg)
Three fundamentals for the week: Focus on the fragility of the US economy Premium
Is the world's largest economy faltering? The first key two figures to be released this week are focused on the fragility of the economy, and the last one is on the battle the Fed is winning: inflation.
![Toncoin price crashes double-digits as Telegram CEO Pavel Durov Arrested](https://editorial.fxstreet.com/images/Markets/Currencies/Cryptocurrencies/cryptos_XtraSmall.jpg)
Toncoin price crashes double-digits as Telegram CEO Pavel Durov Arrested
Toncoin (TON) plunged 14% in two days, reaching a low of $5.23 on Sunday. As of Monday, it trades at around $5.73. This bearish sentiment was initiated by the arrest of Pavel Durov, CEO of Telegram, by the Fench authorities on Saturday.
![Moneta Markets review 2024: All you need to know](https://editorial.fxstreet.com/images/IT/Testing/Review/FXSBadgeCertifiedBackg_XtraSmall.png)
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.