Oil edges lower amid worries over US economy, market oversupply
Oil prices declined for a second session on Thursday, after the Federal Reserve cut interest rates as expected and traders focused on concerns about the U.S. economy and excess supplies, APA reports, citing Reuters.
Brent crude futures fell 13 cents, or 0.19%, to $67.82 a barrel by 0417 GMT. U.S. West Texas Intermediate futures dropped 18 cents, or 0.28%, to $63.87.
The Fed cut its policy rate by a quarter of a percentage point on Wednesday and indicated it will steadily lower borrowing costs over the rest of the year, responding to signs of weakness in the jobs market.
Lower borrowing costs typically boost demand for oil and push prices higher.
But the latest move and the hint of two more cuts this year was already priced in, said Priyanka Sachdeva, a senior market analyst at Phillip Nova.
“What caught markets’ attention was not just the easing, but Powell’s downbeat message,” she said, referring to Fed Chair Jerome Powell.
“He stressed weakening job markets and inflation that remains sticky, making the cut look more like risk-management than a demand booster.”
The indication of more rate cuts coming from the Fed signals that policymakers assess risk to the economy from unemployment to be higher than from inflation, said Claudio Galimberti, chief economist and global director of market analysis at Rystad Energy, in a client note.
Persistent oversupply and soft fuel demand in the U.S., the world’s biggest oil consumer, also weighed on the market.
U.S. crude oil stockpiles fell sharply last week as net imports dropped to a record low while exports jumped to a near two-year high, data from the Energy Information Administration showed on Wednesday.
A rise in distillate stockpiles (USOILD=ECI), by 4 million barrels, however, against market expectations of a gain of 1 million barrels, raised worries about demand in the world’s top oil consumer and pressured prices.
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