Oil prices slow sell-off as expectations of Fed rate cut grow

By Katya Golubkova

Tokyo (Reuters) – The sharp sell-off in crude oil prices came to a halt on Thursday after expectations of a rate cut by the U.S. Federal Reserve offset a series of weak economic data from the world's two largest economies, the United States and China.

Brent crude futures rose 3 cents to $76.08 a barrel. U.S. West Texas Intermediate crude futures fell 5 cents to settle at $71.88 at 00:36 GMT. Both contracts lost more than $1, or more than 1%, in the previous session, for declines of over 1%.

WTI prices hit their lowest since early February on Wednesday after revised U.S. labor market statistics showed fewer jobs than previously reported and weak economic data from China, the world's second-largest economy.

Revised labor market data offset support from a decline in US oil inventories.

However, the overnight decline in oil prices took a breather in early Thursday trading as markets focused on the prospect of near-term interest rate cuts in the US.

The Federal Reserve appears to be on track to cut interest rates in September after an “overwhelming majority” of officials said such a move was likely, according to minutes of the central bank's July 30-31 meeting.

“The minutes of the Fed's July 31 meeting show that cuts are imminent,” said a note from ANZ Research. “The prospect of monetary easing should support sentiment in energy and metals markets.”

Lower interest rates reduce borrowing costs, which can stimulate economic activity and demand for oil.

Geopolitical risks also remained in investors’ focus.

In the Middle East, US President Joe Biden, in a phone call with Israeli Prime Minister Benjamin Netanyahu, stressed the urgent need to conclude a ceasefire agreement in the Gaza Strip in exchange for hostages and referred to the upcoming talks in Cairo, which are of crucial importance.

However, US Secretary of State Antony Blinken's Middle East trip earlier this week ended without an agreement between Israel and Hamas fighters on a ceasefire in the Palestinian enclave.

(Reporting by Katya Golubkova in Tokyo; Editing by Shri Navaratnam)