Oil prices saw minimal change after the US Federal Reserve’s interest rate cut. Further rate cuts are expected, potentially boosting oil demand. US crude stockpiles decreased, but distillate stockpiles increased, raising demand concerns. Global oil demand has shown a slight year-over-year increase. Flight volumes are easing in some regions, while growing in others, according to JP Morgan.
Oil prices were little changed on Thursday after the U.S. central bank lowered its key interest rate as widely expected, while an indication of more rate cuts before year-end raised the prospect of a demand boost spurred by falling borrowing costs.
Brent crude futures were 8 cents, or 0.12%, down at $67.87 a barrel at 0042 GMT. U.S. West Texas Intermediate futures were down 10 cents, or 0.16%, at $63.95.
The Federal Reserve cut is 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, as policymakers responded to signs of weakness in the jobs market.
Lower borrowing costs typically boost demand for oil.
The indication of more cuts signals the Fed assesses risk to the economy from unemployment to be significantly higher than from inflation, Claudio Galimberti, chief economist and global director of market analysis at Rystad Energy, said in a client note.
“For Brent in particular … the cut and the two expected by the end of the year will be a bullish factor, which will in part counter the bearish OPEC+ unwinding strategy,” he said, referring to increased oil supply from members of the Organization of the Petroleum Exporting Countries and allies.
On the demand side, 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, showed data from the Energy Information Administration.
However, a rise in distillate stockpiles by 4 million barrels, versus market expectations of 1 million barrels, raised concern about demand in the world’s top oil consumer, pressuring prices.
Overall, global oil demand averaged 104.4 million barrels per day (mpd) through September 17, a year-over-year rise of 0.520 mbd, JP Morgan said in a client note. Year-to-date, demand was up 0.8 mbd, just shy of the bank’s projected 0.83 mbd.
“While flight volumes in the U.S. and China are easing as the summer travel season winds down, activity in Europe, the Middle East, and Latin America continues to grow,” JP Morgan said.
