Oil on Track for 5th Week of Gains as US Soft Landing Seems Possible
Oil prices have been on a tear recently, supported by deepening supply cuts announced by the world’s largest oil producers earlier this month. As a result, benchmark crude and oil prices are in the green again, heading for their fifth straight week of gains.
Oil and Benchmark Crudes On Track for 3.6% Weekly Surge
Oil prices were headed to secure their fifth consecutive week of gains on Friday as strong demand and supply cuts prop up the market. Earlier this month, the OPEC+ alliance announced notable supply cuts, putting oil and benchmark crudes on track for a 3.6% weekly rise.
At the time of writing, Brent crude and the US West Texas Intermediate (WTI) were slightly down, at $83.6 and $79.8, respectively.
OPEC+, an organization that enables the cooperation of the world’s biggest oil producers, has been trimming oil output since November in response to waning prices. Earlier this month, OPEC+ members Saudi Arabia and Russia announced further supply cuts to bolster prices.
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US Soft Landing Increasingly Likely
The latest weekly surge in oil prices comes amid growing risk appetite in broader financial markets, driven by rising expectations that leading global central banks are coming to an end of their tightening cycles. As a result, the outlook for global economic growth and energy demand has improved considerably.
Investors have warmly welcomed the idea of interest rates reaching their peak, while it is also looking increasingly likely that the US economy will not fall into a recession. Peaking rates, and a significant decline in inflation, have further supported the US “soft landing” narrative.
A soft landing typically refers to an economic scenario where a country’s economy transitions smoothly from a period of rapid growth to a more sustainable and stable level of growth, avoiding a sharp downturn or recession. This was enabled by the Fed’s aggressive rate-hiking campaign, which lasted for more than a year, to slow down the US economy’s growth.
However, even though Fed’s latest hike took interest rates to the highest level in 22 years, the US economy continues to display impressive levels of resilience. On Thursday, investors’ appetite for risk assets was further boosted after new gross domestic product (GDP) data showed that the US economy grew at a 2.4% rate in the second quarter, beating the economists’ expectations.
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