Street Calls of the Week
Investing.com -- Oil prices drifted higher Thursday, trading near two-week highs as traders digested an interest rate cut from the Federal Reserve amid worries of slowing U.S. growth.
At 04:55 ET (08:55 GMT), Brent oil futures for November gained 0.2% to $68.10 a barrel and West Texas Intermediate crude futures rose 0.3% to $64.23 a barrel.
Crude prices had steadily advanced this week as continued military action between Russia and Ukraine spurred concerns over disruptions in Russian oil output. Speculation over more western sanctions on Russia’s oil industry also buoyed prices.
A softer dollar, which retreated before the Fed’s Wednesday decision, had aided crude’s gains earlier this week. But the dollar firmed on Thursday, pressuring oil.
Despite clocking some gains this week, oil prices were still nursing steep losses in 2025, as prices were battered by fears of slowing demand and a looming supply glut.
Traders digest Fed rate cut
The Fed cut interest rates by 25 basis points as expected on Wednesday, and signaled that it will steadily cut rates in the coming months.
The move was largely in line with market expectations, and left traders pricing in a 93% chance that the central bank will cut rates by another 25 bps in October, CME Fedwatch showed.
But while lower rates tend to boost oil demand, markets also fretted over the Fed’s plans to cut rates further, given that it indicated increasing concerns over the U.S. economy among policymakers.
A cooling labor market appeared to be the biggest motivator of the Fed’s cuts. But sticky U.S. inflation could discourage further easing from the central bank, especially if inflationary pressures from higher U.S. trade tariffs become more pronounced.
The dollar firmed after the Fed’s decision, recovering from a 3-½ year low hit in the run-up to Wednesday’s move. Some resilience in the dollar also weighed on crude prices.
Mixed U.S. inventory data
Energy Information Administration data showed on Wednesday that U.S. oil inventories shrank by a bumper, unexpected 9.285 million barrels in the week to September 12. Gasoline inventories also shrank by 2.3 million barrels, driven chiefly by high exports.
But the overall inventory draw was largely offset by EIA data showing an outsized 4 million barrel build in distillate stockpiles.
The distillate build showed demand for fuels and other oil derivatives was cooling ahead of the winter season, which usually entails softer oil demand.
ANZ analysts said a “large jump in EIA’s adjustment factor also cast doubt over the validity of the (inventory) data.”
Ambar Warrick contributed to this article