Oil prices fall amid US demand concerns despite Fed rate cut

Oil prices fell on Friday, as fears about fuel demand in the US outweighed expectations that the first interest rate cut by the US Federal Reserve this year would lead to increased consumption, UNN reports with reference to Reuters.

DetailsBrent crude futures fell 15 cents, or 0.2%, to $67.29 a barrel by 04:32 GMT (07:32 Kyiv time), while US West Texas Intermediate crude futures fell 23 cents, or 0.4%, to $63.34.

Both benchmarks are still trending upwards for the second consecutive week.

On Wednesday, the Fed cut its key rate by a quarter of a percentage point and signaled further cuts in response to signs of labor market weakness.

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Lower borrowing costs typically stimulate oil demand and price increases.

“The market is caught between conflicting signals. On the demand side, all energy agencies, including (the Energy Information Administration), have expressed concerns about its weakening, which has tempered expectations of significant price increases in the short term,” said Priyanka Sachdeva, an analyst at Phillip Nova.

“On the supply side, the planned increase in OPEC+ production and signs of excess fuel and raw material inventories in the US are weighing on sentiment,” she noted.

A 4 million barrel increase in US distillate inventories, despite market expectations of a 1 million barrel increase, raised concerns about demand from the world’s largest oil consumer and put pressure on prices.

Economic data also fueled fears. Data released this week on unemployment claims showed that the US labor market has weakened: labor demand and supply have fallen, and single-family home construction in August fell to a nearly 2.5-year low amid a surplus of unsold new homes.

In Russia, which in 2024 became the world’s second-largest oil producer after the US, the Ministry of Finance announced a new measure to protect the state budget from oil price fluctuations and Western sanctions, which somewhat eased fears about supplies.

“President Trump’s comment that he prefers low prices over sanctions against Russia also eased fears of supply disruptions,” ANZ analyst Daniel Hynes said in a note on Friday.

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