Expectations for Interest Rate Cut Grow
July 12, 2024
With the CPI falling, surveys have shown that the market is now expecting an 89% chance of an interest rate cut in September 2024 up from the previous 73% chance. The general thought is that if the Federal Reserve starts to cut interest rates it will become more accommodative to economic growth, which could lead to more energy demand.
The latest OPEC monthly report displayed a reduction in oil production for the month of June with Saudi Arabia producing even less than its quota. Several countries such as Iraq and Kazakhstan continued to overproduce while Saudi Arabia takes on more of the share of cuts. In addition, Saud Arabia exports of crude dropped to their lowest level in 10-months due to an uptick in fuel oil and crude oil burning for electricity generation and more competition from cheap Russian crude.
The energy markets are higher this morning and these markets are likely in for more congestion. If the bulls are going to take these markets higher, they need to get to work and rallied prices through resistance levels. If they cannot get that done here in the near term, then more rangebound trading is in the cards.