Oil’s Recovery Continues Amid Rate Cut Hopes, Supply Challenges

WTI crude oil has rebounded to $75.75 per barrel in thin market trading. Energy traders are cautiously optimistic, focusing on expectations of a Federal Reserve rate cut in Q3 while grappling with oversupply risks.

The American Petroleum Institute (API) and the Energy Information Administration (EIA) have reported a significant increase in US crude oil supplies this week. Despite previous efforts to curb production, domestic demand remains lackluster, leading to excess production at US refining facilities.

OPEC+ (the Organization of the Petroleum Exporting Countries and its non-member allies) is poised to phase out voluntary production caps that have restricted global supply by over 2.2 million barrels per day. However, energy markets remain wary of potential oversupply, pushing crude oil prices to their lowest levels since February.

Market sentiment is heavily influenced by hopes of rate cuts from the Federal Reserve. Rate markets are currently pricing in a 70% chance of at least a single quarter-point cut in September.

WTI’s technical outlook shows a two-day recovery from a near-term bottom of $72.45. While bulls aim to bring WTI bids back to the $78.00 consolidation zone, the 50-day Exponential Moving Average (EMA) poses a potential exhaustion risk.