Oil prices showed minimal movement on Thursday after the U.S. Federal Reserve lowered its key interest rate by a quarter of a percentage point, a move that was widely anticipated by the market. The central bank also signaled its intention to steadily lower borrowing costs further before the end of the year. This prospect of falling interest rates typically boosts economic activity and oil demand by making borrowing cheaper for businesses and consumers.
While the long-term outlook for demand was supported by the Fed’s dovish stance, prices faced countervailing pressures. Brent crude futures were marginally down 0.12% to $67.87 a barrel, while U.S. West Texas Intermediate futures dipped 0.16% to $63.95. Analysts noted that the expected rate cuts could provide a bullish counterweight to the bearish pressure from OPEC+’s strategy to gradually unwind its production cuts and increase supply.
Market sentiment was also influenced by mixed U.S. inventory data. A sharp drawdown in crude stockpiles last week, driven by record low net imports and a surge in exports, offered some price support. However, this was offset by a larger-than-expected build of 4 million barrels in distillate stocks, raising concerns about the strength of demand in the world’s top oil consumer.
Globally, oil demand has shown modest growth, averaging 104.4 million barrels per day with a year-over-year increase of 0.52 mbd. According to JP Morgan, year-to-date demand is slightly below its projections. The bank noted that while travel demand is easing in the U.S. and China post-summer, activity in Europe, the Middle East, and Latin America continues to grow, providing a mixed but overall stable demand picture.
