By Barani Krishnan
Investing.com - Demand worries are continuing to hinder oil prices, but prospects of the first U.S. interest rate cut in a decade helped prices move higher Monday.
U.S. West Texas Intermediate crude settled up 67 cents, or 1.2%, at $56.87.
London-traded Brent, the benchmark for oil outside of the U.S., settled at $63.71, up 25 cents, or 0.4%.
“Oil is stuck on the back burner as the markets all wait for the outcome of the U.S.-China trade talks,” said Phil Flynn, senior analyst for energy at Chicago’s Price Futures Group.
“And, of course, the Fed decision is looming large, where it is widely expected that the Fed will cut rates for the first time since 2008,” Flynn added. “All that macroeconomic anticipation is reminding us that oil prices are focused on global growth ideas for market direction.”
Expectations that the Federal Reserve will cut rates by at least 25 basis points at its July 30-31 policy meeting powered a solid run across markets this month, helping gold hit six-year highs above $1,450 at one point. While WTI and Brent are headed for their second month of losses in three, both averted some of their worst downside in July on buying support linked to speculation over the rate cut.
Apart from the Fed, the central banks of Japan and England also face interest rate decisions this week. That aside, the U.S. jobs report for July, along with Chinese, U.S. and euro zone manufacturing numbers, among others, make up for a data-heavy week that again pits concerns about the global economy versus official response.
In the latest sign of a global slowdown, Japan slashed its economic growth forecast for this year largely due to weaker exports, in a sign the protracted U.S.-China trade war is taking a bigger toll on the world's third-largest economy.
The announcement followed U.S. data out Friday that confirmed a slowdown in the U.S. economy during the second quarter.
The International Monetary Fund recently cut its own global growth outlook, while European Central Bank President Mario Draghi said last week that prospects for the euro zone economy were getting “worse and worse”.
On Iran’s nuclear talks, Abbas Araqchi, a senior negotiator for the Islamic Republic, called the discussions with parties in Tehran with global powers as “constructive” with “lots of commitments” and “good” discussions.
If tensions over Iran ease further or if Tehran manages to strike a new nuclear deal with the Trump administration to do away with sanctions on its oil, there are concerns that up to 2 million barrels per day more of crude could enter the market, negating OPEC production cuts and adding to the current oversupply.