Oil prices have declined as traders consider the impact of a US Federal Reserve interest rate cut alongside rising American fuel inventories. Brent crude traded below $US68 a barrel, following a 0.8 per cent decrease on Wednesday. West Texas Intermediate also saw a dip, falling below $US64.
Lower interest rates usually stimulate energy demand; however, the market had largely anticipated the quarter percentage point cut ahead of the Fed’s announcement. This led traders to unwind hedges against a more substantial rate reduction, further contributing to the price decline.
Wednesday’s drop returned oil prices to the middle of the $US5 range where it has fluctuated since early August. Various geopolitical factors have influenced price volatility, including increased attacks by Ukraine on Russian energy infrastructure. Additionally, the accelerated return of OPEC+ supply has fuelled predictions of a potential surplus later in the year. Ongoing economic effects from US tariffs are also impacting the oil market.
