Oil Prices Fall as Fed Hints at Slower Rate Cuts

19 Dec 2024 , 11:07 AM

Following the U.S. Federal Reserve’s indication that it might slow down interest rate decreases in 2025, which could have an effect on fuel demand, oil prices dropped in early trading on Thursday.

Brent futures had dropped 33 cents, or 0.45%, to $73.06 a barrel. At $70.22, U.S. West Texas Intermediate crude dropped 36 cents, or 0.51%.

The declines undo a large portion of Wednesday’s gains, when prices ended the day higher as U.S. crude stocks dropped and the U.S. Federal Reserve lowered interest rates by an anticipated 25 basis points. However, their gains were curtailed when the central bank subsequently expressed a more pessimistic assessment of the 2025 prognosis, which still weighs on market sentiment.

Due to persistently strong inflation, central bankers predicted at the policy meeting on December 17–18 that they would only lower interest rates by a quarter of a percentage point in the upcoming year. This is half a point less than what they had predicted in September.

Reduced borrowing costs due to lower rates might increase demand for oil and economic growth.

The Energy Information Administration said on Wednesday that for the week ending December 13, gasoline inventories increased while crude and distillate stockpiles in the United States decreased.

According to the EIA, crude stocks dropped 934,000 barrels for the week to 421 million barrels, while a Reuters poll of analysts predicted a decline of 1.6 million barrels.

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