Oil rates drop after Fed’s remarks on slow pace of rate cuts next year

(MENAFN) Oil prices slipped in early trading on Thursday following the Federal Reserve's indication that it would slow the pace of interest rate cuts next year, which could dampen fuel demand. The Fed's stance raised concerns about economic growth, leading to a decline in oil prices as investors reassessed their expectations for future demand.

By 0107 GMT, Brent crude futures had fallen by 33 cents, or 0.45 percent, to USD73.06 per barrel. Meanwhile, U.S. West Texas Intermediate crude was down 36 cents, or 0.51 percent, at USD70.22 per barrel. The drop came after a period of gains on Wednesday, when oil prices had settled higher due to a decrease in U.S. crude inventories and the expected 25 basis point rate cut by the Federal Reserve.

However, the gains were capped after the Fed issued a more hawkish outlook for 2025, suggesting that it expected only two interest rate cuts of 0.25 percent by the end of that year. The more cautious stance regarding future rate reductions prompted concerns about slower economic growth, which in turn could limit oil demand.

Low interest rates typically reduce borrowing costs, supporting economic expansion and potentially increasing demand for oil. However, the Fed's outlook now suggests that any such support may be more gradual than previously anticipated.

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