WTI rallies near $78.90 in US data boosting rate cut bets

WTI prices gains traction near $78.90 on early Friday trading. The softer US April inflation data, Fed rate cut expectations, and a drop in US crude inventories boost the black gold. The ongoing geopolitical risks in the Middle East might cap the downside of WTI prices.

The latest US Consumer Price Index print indicated a slight easing of inflation in April. As a result, there is anticipation that the Fed may implement interest rate cuts in September. This dovish stance weighs on the US dollar and benefits USD-denominated oil, as lower interest rates can stimulate economic growth and boost crude oil demand.

Additionally, a decline in oil inventories has provided support for WTI prices. According to the Energy Information Administration (EIA), crude inventories in the US fell by 2.5 million barrels to 457 million barrels for the week ending May 3. This exceeded market consensus expectations of a 1.35 million-barrel decrease.

Amidst these developments, oil traders are closely monitoring geopolitical tensions in the Middle East. Recent movements of Israel’s tanks into Jabalia and Rafah have escalated concerns. Ceasefire negotiations, mediated by Qatar and Egypt, remain at a stalemate, with Hamas demanding an end to attacks and Israel refusing until the group is annihilated. Any further escalation in geopolitical risks could impact oil supply and potentially lift WTI prices