Oil prices declined in Asian trading on Thursday, easing after earlier gains to two-week highs as markets digested the Federal Reserve’s interest rate cut and mixed U.S. inventory reports.
Crude had been climbing steadily this week as ongoing military activity between Russia and Ukraine stoked fears of disruptions to Russian oil production. Speculation over potential additional Western sanctions on Russia’s oil sector also supported prices.
A weaker U.S. dollar earlier in the week had contributed to crude’s gains, but the dollar strengthened on Thursday, putting downward pressure on oil. Brent crude for November delivery fell 0.5% to $67.62 per barrel, while West Texas Intermediate (WTI) crude futures also dropped 0.5% to $63.37 per barrel by 22:01 ET (02:01 GMT).
Despite the recent gains, oil prices are still coping with significant losses in 2025, as concerns over slowing demand and potential oversupply continue to weigh.
Fed Rate Cut and Market Outlook
The Federal Reserve reduced interest rates by 25 basis points on Wednesday, as widely anticipated, and indicated it would continue gradual cuts in the coming months. The move largely met market expectations, with CME FedWatch showing traders pricing in a 93% probability of another 25-basis-point cut in October.
While lower rates typically support higher oil demand, markets are cautious given the Fed’s signals about increasing concern over the U.S. economy. Analysts noted that a cooling labor market appeared to be the primary driver of the Fed’s decision. However, persistently high U.S. inflation could limit further easing, especially if inflationary pressures from elevated trade tariffs become more pronounced.
Following the Fed’s announcement, the U.S. dollar strengthened, recovering from a 3½-year low reached before the rate cut. This dollar resilience added pressure on crude prices.
Mixed U.S. Inventory Data
Data from the Energy Information Administration (EIA) on Wednesday showed a surprising 9.285 million-barrel draw in U.S. oil inventories for the week ending September 12. Gasoline stockpiles also fell by 2.3 million barrels, primarily driven by strong export activity.
However, these reductions were largely offset by a 4 million-barrel increase in distillate inventories, signaling softer demand for fuels and other oil products ahead of the winter season, which typically sees weaker oil consumption.
ANZ analysts commented that “a large jump in EIA’s adjustment factor also cast doubt over the validity of the (inventory) data.”
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