Oil prices fell as signs of weak U.S. demand offset a sharp interest rate cut by the Federal Reserve and the impact of rising tensions in the Middle East.
Brent crude futures were trading near $73 a barrel, while WTI was near $70. U.S. gasoline demand fell further, to less than 9 million barrels, and jet fuel consumption fell for a third straight week, according to data from the Energy Information Administration released yesterday.
Brent has fallen about 15% this quarter on concerns about China’s economic slowdown and a global supply glut. The Federal Reserve cut interest rates by 50 basis points yesterday, but its chairman, Jerome Powell, warned that no one should see that as a trend.
Crude oil’s rally earlier this week was driven by expectations of a big rate cut by the Federal Reserve, said Vandana Hari, founder of Vanda Insights in Singapore. “Now that they’ve been cut, attention is likely to return to weak oil market fundamentals,” she added.
Middle East Tensions
In the Middle East, Israeli Defense Minister Yoav Galant announced what he called a new phase in the war with regional Islamist groups, saying troops would be shifted to the Lebanese border. That raised concerns about a wider conflict that could involve Iran, an OPEC member, which provides financial support to Hamas and Hezbollah.
Shrinking U.S. inventories could also provide some impetus for higher oil prices. Crude stocks at the major storage hub of Cushing, Oklahoma, were well below the five-year seasonal average and close to what is considered bottom-of-the-tank levels, according to data from the Energy Information Administration.
