Oil Rises as Markets Rally on Fed’s More Aggressive Rate Cut
(Bloomberg) -- Oil advanced as a risk-on tone swept across wider financial markets following the steep interest-rate cut by the Federal Reserve.
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West Texas Intermediate rose to top $71 a barrel, while Brent futures climbed above $74 a barrel. Equities rallied across the globe as the Fed’s move reinforced expectations that the US economy will avoid a downturn.
“In the oil market, the softer monetary policy outlook has fostered expectations of stronger future demand, supporting a more likely bullish outlook for crude prices further out,” SEB analyst Ole Hvalbye said in a note. “The move, driven by progress in managing inflation, reflects the Fed’s shift in focus towards supporting the labor market and the broader economy.”
Investors are also closely watching developments in the Middle East after Israeli Defense Minister Yoav Gallant declared what he called a “new phase” in the war with regional Islamist groups. That has raised fears about a wider conflict that could involve Iran, an OPEC producer.
WTI is still on track for a quarterly loss on concerns over China’s economic slowdown and ample supply. Adding to the bearish outlook, a measure of US gasoline demand fell further below 9 million barrels a day while jet fuel consumption ebbed for a third straight week, according to government data.
Shrinking US inventories could underpin further price gains. Crude stockpiles at the key storage hub at Cushing, Oklahoma, are significantly lower than the five-year seasonal average and close to what’s considered “tank bottom” levels.
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--With assistance from Sarah Chen.
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