Crude oil prices are poised to close the week with an unusual increase, following the Federal Reserve’s decision to lower the key interest rate by 0.5%. This marks a notable shift in the market after several months of volatility.
Earlier today, both Brent crude and West Texas Intermediate (WTI) experienced slight declines during midmorning trading in Asia. However, they are expected to finish the week higher. WTI has risen from around $69 per barrel to nearly $72 per barrel at the time of this report, while Brent crude is projected to gain about $2 per barrel over the week.
Support for oil prices has also come from recent data showing a drop in U.S. crude oil inventories, which fell to their lowest level in 12 months last week, according to the Energy Information Administration. This decline has renewed hopes for increased oil demand, further bolstered by Citi’s latest supply update, indicating a shortage of 400,000 barrels per day.
Following the Fed’s rate cut, analysts from ING noted that this adjustment was largely anticipated in current market prices. They pointed out that attention will likely shift back to demand concerns. China remains a primary focus for demand issues, but reports indicate that refiners in Europe are also reducing their operating rates due to low profit margins.
Despite these challenges, reports from Bloomberg highlight that diesel imports into the European Union and the UK are expected to reach their highest levels in 17 months this September. The average daily inflow of diesel and gasoil is estimated at about 1.36 million barrels, according to Kpler tanker-tracking data.
This situation reflects a tightening supply caused by maintenance season in the refining sector and cutbacks in run rates. Even so, overall demand remains subdued compared to previous years, primarily due to reduced industrial activity.