Oil rates see upward movement over potential US rate cuts
Date
9/17/2024 7:51:26 AM
(MENAFN) On Monday, oil prices saw an upward movement driven by expectations of a potential interest rate cut in the United States, the world's largest oil consumer. The international benchmark brent crude oil price increased by 0.74 percent, reaching USD72.14 per barrel by 11:35 a.m. local time (0835 GMT), up from the previous session’s close of USD71.61. Similarly, the US benchmark West Texas Intermediate (WTI) saw a rise of 0.93 percent, trading at USD68.38 per barrel after closing at USD67.75 in the prior session.
The anticipated rate cut from the US Federal Reserve, set to be discussed in their meeting on Wednesday, is influencing the oil markets. This would be the Fed’s first rate cut since 2020 and is expected to initiate an easing cycle. Despite market positioning for a significant 50 basis points cut, there remains some uncertainty about the extent of the reduction, with a 25 basis points cut also still being considered.
Lower interest rates generally lower borrowing costs, which tends to boost economic activity and increase oil demand. This prospect is contributing to the rise in oil prices. However, gains in oil prices were tempered by concerns over demand following recent economic data from China, the world's largest oil importer. The data revealed signs of economic weakness, with industrial production for August falling short of expectations, rising unemployment, and further declines in house prices.
The mixed signals from the economic data in China, coupled with the potential rate cut in the US, are creating a complex backdrop for oil prices. While the prospect of easier monetary policy in the US supports higher oil prices, concerns about slowing demand from China are capping the gains.
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