Oil prices fall as US rate cut fails to boost market sentiment By Reuters

By Colleen Howe

BEIJING (Reuters) – Oil prices fell in Asian trade on Thursday after a bigger-than-expected interest rate cut by the Federal Reserve raised concerns about the U.S. economy.

November futures were down 34 cents, or 0.46 percent, at $73.31 a barrel by 0015 GMT, while October WTI crude futures were down at $70.49 a barrel in down 42 cents or 0.59%.

The US central bank cut interest rates by half a percentage point on Wednesday, suggesting the Fed saw a slowdown in the labor market. That view appeared to outweigh the boost that interest rate cuts typically bring to economic activity.

“While the 50 basis point cut points to tough economic headwinds ahead, bear investors were left unsatisfied after the Fed raised its medium-term outlook for rates,” ANZ analysts said in a note.

Weak demand from China’s slowing economy continued to weigh.

“Concerns about continued demand from China overshadowed the Fed’s decision,” said IG market analyst Tony Sycamore.

China’s refinery output slowed for a fifth month in August, statistics bureau data showed over the weekend.

China’s industrial output growth also slowed to a five-month low last month, and retail sales and new home prices fell further.

However, Citi analysts said Chinese oil demand could rebound by 300,000 bpd year-on-year in the fourth quarter, following improvements in independent refineries and the launch of the new Shandong Yulong Petrochemical refinery, providing some support for global demand.

Markets followed events in the Middle East after walkie-talkies used by the Lebanese armed group Hezbollah exploded on Wednesday, following similar pager explosions the previous day.

Israeli officials have not commented on the attacks, but security sources said Israel’s Mossad spy agency was responsible, raising fears of an escalation in Israel’s 11-month war in Gaza.