Crude oil prices are on track to finish the week with a notable increase, a rare occurrence in recent months, following the Federal Reserve’s decision to reduce the key interest rate by 0.5%.
In midmorning Asian trading, both Brent crude and West Texas Intermediate (WTI) experienced slight declines but are expected to conclude the week higher than where they began. WTI has risen from approximately $69 per barrel to nearly $72 per barrel at the time of this report, while Brent crude is anticipated to gain about $2 per barrel over the week.
Supporting this upward momentum are reports from the Energy Information Administration, indicating that U.S. crude oil inventories fell to their lowest level in 12 months last week. This decline has reignited optimism for increased oil demand, further bolstered by Citi’s latest supply update, which projected a shortfall of 400,000 barrels per day.
Following the Fed’s announcement, analysts at ING noted that the rate cut had already been factored into oil price benchmarks. They cautioned that focus may shift back to demand concerns, particularly regarding China, which remains a significant factor in global oil demand. Reports also indicate that European refiners are reducing their run rates due to tight profit margins, although this doesn’t necessarily reflect a downturn in fuel demand.
In fact, diesel imports into the European Union and the UK are expected to reach their highest levels in 17 months this September. According to Kpler tanker-tracking data, the average daily inflow of diesel and gasoil stood at approximately 1.36 million barrels. While the refining sector is currently in a maintenance phase and experiencing run rate cuts due to weak margins, overall demand has remained subdued relative to previous years, primarily attributed to lower industrial activity.
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