Oil prices rise 2% on US interest rate cut, helps Brent crude recover | World News
Oil prices rose 2 per cent on Thursday after the Federal Reserve’s large cut in US interest rates, helping global benchmark Brent crude recover from its lowest in nearly three years hit last week.
Brent futures rose to $75.09 a barrel by 12:19 p.m. ET (1619 GMT), up by $1.44, or 2 per cent, and rebounding from last week’s levels below $69 a barrel. US crude gained $1.53, or 2.1 per cent, to $72.44 a barrel.
The US central bank cut interest rates by half a percentage point on Wednesday. Interest rate cuts typically boost economic activity and energy demand, but the market also saw it as a sign of a weaker US labour market that could slow the economy.
“While the 50 basis point cut hints at harsh economic headwinds ahead, bearish investors were left unsatisfied after the Fed raised the medium-term outlook for rates,” ANZ analysts said in a note.
The Bank of England on Thursday held interest rates at 5.0 per cent.
Crude prices were also being boosted by rising tensions in the Middle East, said Tim Snyder, chief economist at Matador Economics.
Walkie-talkies used by Lebanese armed group Hezbollah exploded on Wednesday following similar explosions of pagers the previous day. Security sources said Israeli spy agency Mossad was responsible, but Israeli officials did not comment on the attacks.
Weak demand from China’s slowing economy was limiting oil’s gains, said Alex Hodes, oil analyst at brokerage StoneX.
Refinery output in China slowed for a fifth month in August, statistics bureau data showed over the weekend. China’s industrial output growth also slowed to a five-month low last month, and retail sales and new home prices weakened further.
Citi analysts say they expect a counter-seasonal oil market deficit of around 400,000 barrels per day (bpd) to support Brent crude prices in the $70 to $75 a barrel range during the next quarter, but that would be temporary.
“As 2025 global oil balances deteriorate in most scenarios, we still anticipate renewed price weakness in 2025 with Brent on a path to $60/barrel,” Citi said in a note on Thursday.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First Published: Sep 19 2024 | 11:45 PM IST
