Despite Brent crude staying close to its annual low, oil prices rose after the Fed rate cut, driving prices up on Thursday. WTI crude futures experienced a similar 1.1% increase, gaining 75 cents to reach $71.66 per barrel, while Brent crude futures for November witnessed a rise of 81 cents, or 1.1%, to $74.46 per barrel. Following a decline in both benchmarks during early Asian trading hours, there was a comeback.
On Wednesday, the U.S. Federal Reserve cut interest rates by half a percentage point, usually encouraging the economy and the energy demand. The market, however, saw the rate reduction as a possible indicator of economic difficulties, especially in the U.S. job market. While the 50 basis point drop suggests impending economic challenges, ANZ analysts pointed out that pessimistic investors were disappointed when the Federal Reserve revised its medium-term rate projection.
The sluggish demand brought on by China’s faltering economy continues to pressure the oil market. According to data from China’s statistics department, August was the fifth consecutive month of a fall in refinery output. Industrial production hit a five-month low, while new house costs and retail sales fell, indicating deeper economic problems.
In the meantime, the Middle East’s geopolitical unrest increased market uncertainty for oil. Hezbollah’s walkie-talkies blew up on Wednesday after similar pager-related occurrences earlier in the week. Israeli officials remained silent on the issue.
In the upcoming quarter, Citi analysts predict a transient shortfall in the oil supply of 0.4 million barrels per day, which may maintain Brent prices at the $70–75 per barrel level. However, they expect oil prices to rise after the Fed rate cut to be temporary. As 2025 draws nearer, they forecast oil prices will probably decline, with Brent perhaps hitting $60 per barrel.
