Oil prices edged lower on Thursday after the U.S. Federal Reserve cut interest rates as traders weighed the expected boost from looser monetary policy against concerns over the health of the American economy.
Brent crude oil, against which Nigerian oil is priced, fell 30 cents or 0.4 percent to $67.65 a barrel at 10:37 a.m. in Nigeria, while U.S. West Texas Intermediate (WTI) crude oil declined 30 cents or 0.5 percent to $63.75.
The Federal Reserve lowered its policy rate by a quarter of a percentage point on Wednesday and signaled further cuts through the rest of the year in response to growing weakness in the jobs market. Lower borrowing costs typically support oil demand, but investor sentiment remained cautious amid signs of a slowing U.S. economy.
Kuwait’s oil minister, Tariq Al-Roumi, said he expects global demand to rise following the Fed’s rate cut, with particular growth anticipated from Asian markets. However, some analysts expressed skepticism over the outlook.
“They did this now because clearly the economy is slowing down,” said Jorge Montepeque, Managing Director at Onyx Capital Group. “The Federal Reserve is trying to restore growth.”
Federal Reserve Chair Jerome Powell acknowledged that downside risks to employment are rising, though inflation concerns still require monitoring.
Market sentiment was also influenced by the latest inventory data from the U.S. Energy Information Administration (EIA).
Crude oil stockpiles fell sharply last week as net imports dropped to a record low and exports surged to near two-year highs.
However, distillate stockpiles rose by four million barrels, compared with expectations of a one million barrel increase, raising concerns about sluggish demand in the world’s largest oil consumer.
Persistent oversupply and soft fuel demand in the U.S. continue to weigh on oil prices, offsetting potential support from monetary easing. While OPEC members expect demand growth from Asia, traders remain cautious that the Fed’s policy shift reflects deeper economic challenges that could cap oil consumption.
