By Deep Kaushik Vakil and Robert Harvey
LONDON (Reuters) -Oil prices were stable on Thursday, as support from growing expectations of an interest rate cut from the U.S. Federal Reserve in September offset higher U.S. inventories and OPEC+ plans to gradually increase supply.
Brent crude futures were up 25 cents or 0.3% at $78.66 a barrel by 1005 GMT. U.S. West Texas Intermediate crude futures were up 31 cents or 0.4% at $74.38.
Oil benchmarks rose more than 1% on Wednesday, recovering after sliding by nearly $8 a barrel over the five sessions through Tuesday.
Nearly two-thirds of economists are now predicting the Fed will cut interest rates in September, according to Reuters’ May 31-June 5 poll, offsetting recent bearish supply news.
Lower interest rates decrease the cost of borrowing, which can incentivise economic activity and boost oil demand.
Prices were still headed for weekly declines of more than 3%.
Trading house Trafigura’s chief economist Saad Rahim said that the decision by producer group OPEC+ to phase out some of its output cuts from October, combined with strong supply in the products market, has driven oil prices lower.
OPEC+, which groups members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, agreed on Sunday to extend most of their production cuts into 2025, but left room for voluntary cuts from eight members to be unwound gradually.
OPEC Secretary General Haitham Al Ghais and Russian Deputy Prime Minister Alexander Novak defended the OPEC+ deal, expressing optimism about continued strong demand for oil.
“Oil markets have over-reacted to the mildly negative OPEC+ meeting outcome. Demand indicators have certainly softened somewhat recently, but are not falling off a cliff,” Barclays analyst Amarpreet Singh wrote in a note.
Meanwhile, U.S. crude stocks jumped by 1.2 million barrels in the week to May 31 while analysts had expected a drawdown of 2.3 million barrels, data from the U.S. Energy Information Administration showed.
“Summer inventory draws should be enough to get Brent oil back into the high $80s-$90 range by September,” but prices could come under pressure in 2025 from slower demand and non-OPEC supply growth, J.P.Morgan analysts wrote in a note.
They forecast Brent to average $83 this year and $75 next year.