Oil prices resume rally after cut despite doubts over demand

Crude oil prices rose on Thursday morning after the Fed announced a 0.5% interest rate cut on Wednesday. The announcement briefly boosted prices on Tuesday, but the rally quickly faded as it raised concerns about the state of the US economy.

Later in the day, prices started to rise again, and early Wednesday morning this trend continued.

“While the 50 basis points cut hints of tough economic headwinds ahead, bearish investors remained unsettled after the Fed raised its medium-term outlook for rates,” ANZ analysts said, quoted by Reuters.

“The bullishness of crude earlier this week was on expectations of a sharp Fed rate cut,” Vandana Hari, founder of Vanda Insights, told Bloomberg. “Now that it has been delivered, the focus is likely to return to oil market fundamentals, which are weak.”

Pessimism about Chinese demand appears to have remained strong and even hints that the Middle East war could widen, potentially involving Iran, failed to lift the benchmarks.

Earlier this week, news broke that thousands of pagers used by Hezbollah fighters had exploded in Lebanon. More explosive news came out of the country today, this time with walkie-talkies and solar equipment. AP quoted Lebanon’s Health Ministry as saying this second wave of explosions killed at least 20 people and injured more than 450.

“We are at the beginning of a new phase of war – it requires courage, determination and perseverance,” said Israeli Defense Minister Yoav Gallant, adding words of praise for the country’s military and security service, noting that “the results are very impressive. ”, without specifying the nature of these results.

This geopolitical uncertainty appears to have fueled bullish sentiment, with some analysts now considering the markets’ recent decline to have been “overdone”.

Citi, meanwhile, had good news on China, forecasting a rebound in oil prices driven by higher refinery rates in the final quarter of the year. According to the bank, the increase in roll rates could add 300,000 bpd to Chinese demand.

By Irina Slav for Oilprice.com

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