SINGAPORE: Oil prices held largely steady on Thursday after the US Federal Reserve cut its key interest rate and signalled more reductions may follow before the year ends. The move, aimed at supporting a slowing economy, raised expectations of a potential boost in oil demand as borrowing costs fall.
Brent crude slipped by 8 cents to $67.87 a barrel in early trade at 0042 GMT, while US West Texas Intermediate eased 10 cents to $63.95.
Fed move shifts outlook for oil
The Fed lowered its policy rate by a quarter percentage point on Wednesday and hinted that further cuts are on the table this year as policymakers react to signs of a cooling jobs market. Lower rates typically stimulate spending and growth, which in turn can lift energy consumption.
Claudio Galimberti, chief economist at Rystad Energy, noted that the Fed’s stance highlights a greater concern about unemployment risks compared to inflation. He added that the easing cycle would likely support Brent prices, even as OPEC and its allies increase oil supply by winding down output curbs.
Mixed signals from US stockpiles
Adding to the market mood, US crude inventories dropped sharply last week as net imports fell to record lows and exports surged to levels not seen in nearly two years, according to the Energy Information Administration.
However, the report also showed an unexpected build in distillate stockpiles, which rose by 4 million barrels against market expectations of just 1 million. That raised some concern about fuel demand in the world’s top oil consumer.
Demand trends show regional shifts
Global oil demand is still holding firm. JP Morgan estimated that consumption averaged 104.4 million barrels per day through September 17, a year-on-year increase of 520,000 barrels. Year-to-date demand is up 800,000 barrels per day, close to the bank’s forecast of 830,000.
The bank pointed out that while summer air travel is tapering off in the US and China, demand growth remains robust in Europe, the Middle East, and Latin America.