Brent steady ahead of US interest rate policy meeting

The front-month ICE Brent contract has moved $0.49/bbl higher on the day, to trade at $72.82/bbl at 09.00 GMT.

PHOTO: Oil barrels with an arrow depicting price gains. Getty Images

Upward pressure:

Brent’s price has moved higher on hopes of an interest rate cut decision at the two-day US Federal Reserve (Fed) policy meeting that will conclude tomorrow.

Oil market analysts have largely priced in a 25-basis point rate cut which is expected to drive demand growth for oil in the world’s largest crude oil consuming nation. “[Market] sentiment was also supported by growing expectations of a more aggressive cut to rates by the Fed,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Lower interest rates can support demand growth as it makes dollar-denominated commodities like oil more affordable for holders of other currencies.

Lingering concerns over disruption in oil supply from Libya also provided support to Brent futures, analysts said. “Libyan exports fell to 314kb/d [314,000 b/d] last week, down from 468kb/d [468,000 b/d] during the first five days of the month,” Hynes added.

Libya’s oil production continues to face disruption as the United Nations-mediated talks in Tripoli have “failed to break an impasse” over the leadership of the country’s central bank, the only globally acknowledged depository of its oil revenues, Hynes remarked.

Downward pressure:

The gloomy demand outlook emerging from China has capped some of Brent’s price gains today. Chinese refiners processed about 59.07 million mt (13.91 million b/d) of crude oil in August, down 6.2% from the same period a year ago, market intelligence provider JLC reported citing data from China’s National Bureau of Statistics (NBS).

“Global demand fears are still strong on weak manufacturing data and more fears that China’s economy is slowing,” Price Futures Group’s senior market analyst Phil Flynn said.

China's latest crude throughput data and tepid oil import numbers have heightened demand growth concerns in the global oil market, analysts said. China imported 11.56 million b/d of crude oil last month, down from 12.43 million b/d imported in August 2023.

“The market remains concerned about weak demand in China,” Hynes added.

By Aparupa Mazumder

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