Oil Prices Decline Due to Demand Concerns Despite US Rate Cut Decision
Global oil markets witnessed a decline in prices during the trading session on Thursday, September 18, affected by concerns over declining demand, despite the US Federal Reserve's decision to cut interest rates for the first time this year.
By the market close, Brent crude futures fell by 0.3% to record $67.76 per barrel, while US crude contracts dropped by 0.4% to $63.81 per barrel.
This decline came in the context of a cautious market reaction, where concerns about the strength of oil demand overshadowed the expected stimulative effect of the US Federal Reserve's decision to cut the interest rate by 25 basis points, which typically stimulates demand for crude due to lower borrowing costs.
Data from the US Energy Information Administration reinforced these concerns, showing a surprising increase in distillate inventories by four million barrels, compared to market expectations of only one million barrels, raising worries about the strength of demand in the world's largest oil-consuming economy. This came despite the fact that the same data revealed a sharp decline in crude oil inventories last week, with net imports falling to a record low and exports reaching a two-year high.
Commenting on the Fed's decision and its impact, Reuters quoted Claudio Galimberti, Senior Economist and Global Director of Market Analysis at Rystad Energy, saying: "Talk of further cuts indicates that the Fed sees the risks to the economy from unemployment as much greater than the risks of inflation."
Galimberti added in a note: "For Brent crude in particular, the expected cuts and further reductions by the end of the year will be driving factors for the rise, which will partially confront OPEC+'s strategy to increase production."
