Oil prices rose on Thursday following a significant interest rate cut from the U.S. Federal Reserve, though lingering concerns over global demand limited the gains. Brent crude futures for November saw an increase of 36 cents, or 0.5%, reaching $74.01 per barrel by 0618 GMT. Meanwhile, WTI crude futures for October climbed 34 cents, or 0.3%, to $71.15 a barrel. Both benchmarks recovered after initial declines in early Asian trading.
The U.S. central bank’s decision to reduce interest rates by half a percentage point on Wednesday was aimed at stimulating economic activity and boosting energy demand. However, the move also signaled concerns about a potentially weaker U.S. labor market that could slow the broader economy. While interest rate cuts typically drive growth, the market remained cautious. ANZ analysts noted, “The 50 basis point cut hints at harsh economic headwinds ahead, but bearish investors were left unsatisfied after the Fed raised the medium-term outlook for rates.”
Weaker demand from China’s slowing economy also contributed to concerns. China’s refinery output fell for the fifth consecutive month in August, according to data from the national statistics bureau. Additionally, industrial output growth in China reached a five-month low, while retail sales and new home prices weakened, further dampening global demand expectations.
Adding to market uncertainties, geopolitical tensions in the Middle East also drew attention. On Wednesday, walkie-talkies used by Hezbollah exploded, following similar incidents with pagers the previous day. Despite these factors, Citi analysts predict a temporary oil market deficit of around 0.4 million barrels per day (bpd), which could support Brent crude prices between $70 and $75 per barrel in the next quarter. However, they anticipate renewed price weakness by 2025, with Brent potentially falling to $60 per barrel.
