By Colleen Howe

Oil Prices Dip Amid Fed Signals

BEIJING (Reuters) – Oil prices fell in early trading on Thursday, reacting to the U.S. Federal Reserve's announcement of a slower pace of interest rate cuts in 2025, raising concerns about fuel demand.

Price Movements

Brent futures dropped by 33 cents (0.45%) to $73.06 a barrel by 0107 GMT, while U.S. West Texas Intermediate crude declined by 36 cents (0.51%) to $70.22.

These declines reverse much of Wednesday's gains, when prices had increased following a dip in U.S. crude stocks and an expected 25 basis points interest rate cut by the Federal Reserve. However, those gains were tempered by a hawkish outlook from the central bank for 2025, negatively impacting market sentiment.

Fed Economic Outlook

During their December 17-18 policy meeting, Fed officials projected only two quarter-percentage-point rate reductions in the coming year, due to persistent inflation, which is half a point less than previous forecasts from September. Lower interest rates typically ease borrowing costs, potentially stimulating economic growth and increasing demand for oil.

Inventory Reports

According to the Energy Information Administration (EIA), U.S. crude and distillate inventories fell, while gasoline inventories rose for the week ending December 13.

Crude inventories decreased by 934,000 barrels to 421 million barrels, falling short of the 1.6 million-barrel draw anticipated by analysts in a Reuters poll.

California's Electric Vehicle Initiative

In a separate development, the U.S. Environmental Protection Agency approved California's groundbreaking plan to ban the sale of gasoline-only vehicles by 2035, mandating that at least 80% of new vehicles be fully electric by that time. California's regulations have been adopted by 11 other states, including New York, Massachusetts, and Oregon.