Oil Market Update

Oil prices cut losses on Friday, remaining on track for a weekly gain as a significant U.S. interest rate cut alleviated concerns over slowing demand.

At 1:43 p.m. ET (1743 GMT), Brent oil futures rose 0.01% to $74.89 a barrel, while West Texas Intermediate (WTI) crude futures increased by 0.3% to $71.39 a barrel.

Oil Heads for Weekly Gains on Rate Cut Cheer

Crude prices have rebounded strongly from near three-year lows reached earlier in September. Much of this recovery occurred this week as the dollar weakened following a 50 basis point rate cut by the Federal Reserve.

Brent and WTI futures are trading up approximately 4% for the week.

Increased geopolitical tensions in the Middle East have also supported crude prices, following Israel's military actions against Hezbollah. Earlier this week, Israel reportedly destroyed communication devices belonging to Hezbollah members, leading to threats of retaliation. Continued fighting in and around Gaza has further heightened concerns.

A weaker dollar contributed to the price increase after the Fed implemented the rate cut beyond market expectations and announced a cycle of easing, which traders anticipate will boost economic growth in upcoming quarters.

Lower interest rates typically encourage economic activity, which is expected to support crude demand.

Rig Counts Unchanged

The number of operational oil rigs in the U.S. remained unchanged at 488 from the previous week, as reported by Baker Hughes. This stability follows recent production disruptions caused by Hurricane Francine.

China Demand Concerns Persist

Despite positive movements in the market, concerns about China continue to plague crude prices. Economic indicators from the world's largest oil importer have shown little improvement.

On Friday, the People’s Bank of China maintained benchmark lending rates, despite increasing calls for stimulus to revitalize the economy.

Recent data indicated that Chinese refinery output has decreased for five consecutive months as of August, with oil imports also remaining weak.

These worries over China led to oil prices dropping to near three-year lows earlier this month and have limited significant recovery in crude markets. Analysts at ING stressed that while China is a key concern for demand, European refiners have reportedly cut run rates due to poor margins.

*(Peter Nurse, Ambar Warrick contributed to this article.)