Oil prices reacted to the Fed rate cut
Oil prices were little changed on Thursday as concerns about demand capped possible gains from a bigger-than-expected interest rate cut by the US Federal Reserve.
This is reported by the Reuters agency.
Brent crude for November was up 8 cents at $73.73 a barrel, while WTI for October was down 3 cents at $70.88 a barrel.
On Wednesday, the US Federal Reserve lowered interest rates by 0.5%. Typically, rate cuts stimulate economic activity and energy demand, but the market saw it as a sign of a weaker labor market that could slow the economy. This view outweighed the positive effect that rate cuts usually have on economic activity.
“While a 50 basis point rate cut points to possible economic difficulties ahead, bearish investors remained unsettled after the Fed raised its medium-term rate forecast,” ANZ analysts said.
Weak demand from China’s slowing economy also continues to weigh on the market. Output from China’s oil refineries fell for a fifth straight month in August, according to statistics bureau data released over the weekend. Industrial production in China also fell to a five-month low, while retail sales and new home prices continued to weaken.
Markets are also watching developments in the Middle East after the explosions of walkie-talkies used by the Lebanese armed group Hezbollah on Wednesday, following similar explosions of pagers the previous day. Security sources said Israel’s Mossad intelligence agency was responsible, but Israeli officials did not comment on the attacks.
Citi analysts forecast an unusual deficit in the oil market at the level of about 0.4 million barrels per day, which will support Brent oil prices in the range of $70-75 per barrel during the next quarter, but this phenomenon will be temporary.
