Brent moves higher on hopes of a December rate cut

The front-month ICE Brent contract has gained by $0.67/bbl on the day, to trade at $63.15/bbl at 09.00 GMT.

IMAGE: Oil storage facility. Getty Images

Upward pressure:

Brent crude’s price has rebounded, reversing earlier losses, as traders priced in the likelihood of a final US Federal Reserve (Fed) rate cut in December.

The expectations come following recent remarks from US policymakers, analysts said. Earlier this week, Fed Governor Christopher Waller said that the US labour market has softened to justify a final 25 bp cut at the central bank’s upcoming meeting next month.

Oil prices moved higher as “expectations grow for a December interest rate cut by the US Federal Reserve,” two analysts from ING Bank noted.

Lower interest rates in the US can boost demand, making dollar-denominated commodities like oil cheaper for holders of other currencies.

Downward pressure:

The US Energy Information Administration (EIA) reported a surge in crude stocks – capping some of Brent’s price gains today.

Commercial US crude oil inventories have increased by 2.8 million bbls to 427 million bbls for the week ending 21 November, according to data from the EIA.

“The market also noted a rise in US oil inventories,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

A build in US crude stocks typically indicates lower demand for oil and can put downward pressure on Brent futures.

The EIA’s weekly inventory report was “relatively bearish,” ING Bank’s analysts added.

By Aparupa Mazumder

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