Oil prices rose on Tuesday, on track to close at a two-week high, on optimism the U.S. Federal Reserve will cut interest rates this week for the first time in more than 10 years, boosting demand expectations in the world’s biggest oil user.
Meanwhile, ahead of weekly data, crude oil inventories in the United States were also forecast to have dropped for a seventh straight week.
Analysts also noted the market was up on optimism over U.S.-China trade talks, which could boost oil demand around the world.
On its second to last day as the front-month Brent LCOc1 futures for September delivery were up 42 cents, or 0.7%, at $64.13 a barrel at 12:06 p.m. EDT (1606 GMT), while U.S. West Texas Intermediate (WTI) crude CLc1 rose 33 cents, or 0.6% to $57.20.
That put both contracts on track to rise for a fourth day in a row to what would be their highest closes since July 16.
For the month, however, both contracts were set to decline due to lingering worries about oil demand with Brent down over 3% and WTI down over 2%.
“Regarding the Fed, the market has priced in a 25 basis point cut for Wednesday,” Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.
“If the language we get from the Fed in post-meeting comments is on the conservative, rather than accommodative side, the U.S. dollar is likely to continue to remain strong and continue to present a headwind for an advance in oil.”
U.S. central bankers will begin their two-day meeting later on Tuesday and were expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago.
U.S. President Donald Trump called on the Federal Reserve to make a large interest rate cut, saying he was disappointed in the central bank and that it had put him at a disadvantage by not acting sooner. [nL2N24V0K9]
Economic growth in the United States 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.
Other analysts said prices were up this week due to technical issues and expectations of bullish U.S. storage reports.
“We believe this week’s price advance is attributable to … some renewed algorithmic related buying … associated with some positive technical signals,” said Jim Ritterbusch of Ritterbusch and Associates, noting the oil complex also appears to be pricing in a bullish U.S. inventory report.
U.S. crude stockpiles were forecast to have dropped by 1.8 million barrels last week, according to analysts in a Reuters poll. The American Petroleum Institute (API), an industry group, is due to release its inventory report at 4:30 p.m. EDT, followed by government data on Wednesday morning.