Oil Jumps On Rate Cut

Oil Jumps On Rate Cut by Andrew Blumer last updated on October 15, 2024

Oil Crosses $74.00 On Us Interest Rate Cut

Oil prices have popped higher after the US Federal Reserve made a large cut to the interest rate policy. However, the upside of oil remains capped amid global demand concerns.

Brent Crude Futures (November) is up by 0.5% ($0.36) and is trading near $74.01. Similarly, the WTI Crude Futures (October) gained 0.3% ($0.34) and is trading around $71.15. During the Asian session, both of these benchmarks turned lower only to recover after the interest rate cut.

Oil Prices To Rise Towards $70 - $75

Wednesday marked an important milestone for the US Federal Reserve as the central bank has cut the rates by 0.5%. This interest rate cut will boost the energy demand and economic activity in the USA. However, some believe that it is also a sign that the labor market is weak which could also slowdown the economy.

According to analysts from ANZ, the 50 bps rate cut is a sign that the US economy is facing headwinds. At the same time, the Fed has played down any hopes for a similar rate cut in the medium term.

Meanwhile, the demand for oil from China is also expected to remain weak due to the economic slowdown. As a result, a slowdown was seen in the refinery output for the 5th month in a row in China.

As a coincidence, the industrial output of China also continues to slow for the 5th month in a row. At the same time, retail sales and industrial output growth have also taken a hit, which is weighing on the Oil demand.

According to analysts from Citi, the oil market will experience a deficit that will support Brent crude oil. They added that the price of oil will likely go up towards $70 - $75 in the next quarter.

As for the year 2025, the weakness in oil prices will return once again and will likely send it down towards $60 per barrel.