Oil Prices on the Rise

Oil prices jumped on Thursday fueled by optimistic sentiment following the Federal Reserve’s significant interest rate cut, alleviating concerns about declining crude demand due to a slowing U.S. economy.

As of 2:06 p.m. ET (1906 GMT), Brent oil futures rose by 1.6% to $74.80 a barrel, while West Texas Intermediate crude futures increased by 1.8% to $71.12 a barrel.

Jobless Claims Rise Less Than Expected

The number of first-time unemployment benefit claims in the U.S. increased to 219,000 for the week ending on September 14, lower than the expected 230,000 and better than the upwardly revised figure of 231,000 from the previous week. This positive news eased some fears regarding the U.S. economic health after the Fed’s recent rate cut of 50 basis points to a range of 4.75% to 5%.

Though lower rates typically support economic activity, concerns continue about the potential slowdown in growth. Fed Chair Jerome Powell clarified that while interest rates would decrease in the short term, the central bank aims to keep them higher in the medium-to-long term.

U.S. Inventories Decline but Product Stockpiles Increase

Recent government data indicated a more significant-than-expected draw of 1.63 million barrels from crude inventories, contrasting the expected draw of 0.2 million barrels. Yet, this was also accompanied by increased distillate and gasoline inventories, raising fears about cooling U.S. fuel demand as the summer travel season ends. Analysts predict further draws in domestic crude stocks as exports accelerate.

Crude Deficit May Support Brent Prices

Analysts at Citi suggest that Brent crude prices may get short-term support due to fourth-quarter demand potentially exceeding supply. The Organization of the Petroleum Exporting Countries (OPEC) and its allies have delayed starting output cut reductions, while ongoing supply losses in Libya could contribute to an oil market deficit of approximately 0.4 million barrels per day in late 2024. This trend might keep Brent prices in the $70 to $75 per barrel range. However, renewed price weakness is anticipated in 2025, forecasting Brent to decrease to around $60 per barrel due to an upcoming surplus of one million barrels per day.

(Contributions by Peter Nurse and Ambar Warrick)