ISLAMABAD (PEN) : Oil prices saw little movement on Thursday as ongoing concerns about demand overshadowed the potential boost from a larger-than-expected Federal Reserve interest rate cut.
Brent crude futures for November edged up 8 cents to $73.73 a barrel, while WTI crude for October dipped 3 cents to $70.88 a barrel. The U.S. central bank’s decision to cut interest rates by half a percentage point on Wednesday usually signals optimism, as lower rates often stimulate economic activity and energy demand. However, this time, many viewed the cut as a warning sign of a weakening labor market that could slow the economy down, dampening the usual positive sentiment.
ANZ analysts noted, “While the 50 basis point cut suggests significant economic challenges ahead, bearish investors were left wanting after the Fed adjusted its medium-term outlook for rates.”
Adding to the uncertainty, weak demand from China’s slowing economy continued to exert pressure. Recent data revealed that refinery output in China slowed for a fifth consecutive month in August. Furthermore, the country’s industrial output growth hit a five-month low, with retail sales and new home prices also showing signs of weakness.
Markets were also closely monitoring developments in the Middle East. Tensions escalated after walkie-talkies used by the Lebanese group Hezbollah exploded, following similar incidents the day before. While security sources suggested that Israel’s Mossad was involved, Israeli officials remained silent on the matter.
Looking ahead, analysts at Citi anticipate a temporary oil market deficit of around 0.4 million barrels per day, which could support Brent crude prices in the $70 to $75 range in the coming quarter. However, they caution that as global oil balances are expected to worsen in 2025, there may be renewed price weakness, projecting Brent could drop to $60 per barrel. This paints a picture of a market grappling with both immediate challenges and longer-term uncertainties.