Oil prices rise as US cuts interest rates and stockpiles fall
Oil prices rose this week, supported by falling U.S. crude inventories, and a cut to US interest rates though gains were limited after the U.S. Federal Reserve signalled it would slow the pace of interest rate cuts in 2025, a move that could dampen economic growth, reduce fuel demand, and strengthen the dollar.
The Federal Reserve on Wednesday cut interest rates and signalled it will slow the pace at which borrowing costs fall further, given a relatively stable unemployment rate and little recent improvement in inflation.
"The bottom line for oil is the longer the Fed stays on pause, the stronger the U.S. dollar. This tends to generate headwinds for commodities like oil," said Harry Tchilinguirian at Onyx Capital Group.
A stronger dollar makes dollar-priced commodities more expensive while higher interest rates weigh on economic growth, potentially reducing demand for oil.
Chinese refining giant Sinopec, meanwhile, expects China's oil consumption to peak by 2027, it said on Thursday.
"The demand-supply balance going into 2025 continues to look unfavourable and predictions of more than 1.0 million bpd demand growth in 2025 look stretched in our opinion. Even if OPEC+ continues to withhold production, the market may still be in surplus," said Suvro Sarkar, DBS Bank energy sector team leader.
Though demand in the first half of December rose year on year, volumes remained lower than expected by some analysts.
JP Morgan analysts said that global oil demand growth for December so far was 700,000 barrels per day (bpd) less than it had expected, adding that global demand this year has risen by 200,000 bpd less than it had forecast in November 2023.
Official data from the Energy Information Administration on Wednesday showed U.S. crude stocks fell by 934,000 barrels in the week to Dec. 13. Analysts polled by Reuters had expected a drawdown of 1.6 million barrels. EIA/S
For fuel cards users, next week will see a price increase in the region of 1.25ppl depending on card type.
From of all the team at Fuelmate may we wish all our customers and readers a Happy Christmas and a successful 2025! Our blogs will resume in January.
