LONDON: Oil prices inched higher on Thursday after the US Federal Reserve cut interest rates, as traders weighed the potential boost from looser monetary policy against ongoing concerns about the US economy.
Brent crude futures rose 34 cents, or 0.5%, to $68.29 a barrel by 11:40 GMT, while US West Texas Intermediate (WTI) crude gained 37 cents, or 0.6%, to $64.42.
The Federal Reserve reduced its policy rate by a quarter percentage point on Wednesday and signaled it would continue lowering borrowing costs steadily through the rest of the year. The move was prompted by signs of a weakening US labor market.
Lower interest rates generally support oil demand by encouraging economic activity, which can push prices higher.
Kuwait’s oil minister, Tariq Al-Roumi, said he expects oil demand to increase following the US rate cut, especially from Asian markets.
However, not all analysts are optimistic about the move's effect on oil prices.
"They did this now because clearly the economy is slowing down," said Jorge Montepeque, Managing Director at Onyx Capital Group. "The Federal Reserve is trying to restore growth."
Federal Reserve Chair Jerome Powell noted that downside risks to employment were rising, even as inflation risks remain and still require careful management.
Despite the Fed’s actions, persistent oversupply and soft fuel demand in the US—the world’s largest oil consumer—continue to weigh on the market.
According to data released Wednesday by the US Energy Information Administration (EIA), US crude oil stockpiles fell sharply last week, driven by a record low in net imports and a surge in exports to near two-year highs.
However, distillate inventories rose by 4 million barrels, significantly more than market expectations of a 1 million barrel increase. This unexpected build raised fresh concerns about weak demand and applied downward pressure on oil prices. — Reuters
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