WTI rises toward $74.50 due to rising speculation of a Fed rate cut in September

West Texas Intermediate (WTI) Oil price extends its gains for the second session, trading around $74.30 per barrel during the Asian session on Thursday. The appreciation in crude Oil prices could be attributed to the rising speculation of an interest rate cut by the US Federal Reserve (Fed) in September. Lower interest rates reduce the cost of borrowing in the United States, the largest Oil consumer. This can incentivize economic activity and potentially boost Oil demand.

The mixed economic data from the United States (US) on Wednesday fueled interest rate cut speculations by the US Federal Reserve (Fed). The ISM US Services PMI soared to 53.8 in May, marking its highest level in nine months and significantly surpassing the forecast of 50.8. In contrast, the ADP US Employment Change report showed that 152,000 new workers were added to payrolls in May, the lowest in four months and well below the forecast of 175,000 and the downwardly revised figure of 188,000 for April.

A Reuters poll conducted from May 31 to June 5 has indicated that nearly two-thirds of economists now predict an interest rate cut in September, offsetting recent bearish supply news from the Organization of the Petroleum Exporting Countries and its allies (OPEC+). According to the CME FedWatch Tool, the probability of a Fed rate cut in September by at least 25 basis points has increased to nearly 70.0%, up from 47.5% a week earlier.

The upside of Oil prices could be limited as the US Energy Information Administration (EIA) Crude Oil Stocks Change showed that crude Oil inventories increased by 1.233 million barrels in the week ending May 31. This marks a reversal from the preceding week's 4.156 million-barrel decline and contrasts with market expectations of a 2.300 million-barrel draw.