Oil Prices Rise Amidst Markets’ Optimism over Fed Funds Rate Cut
Global crude oil prices increased by more than one per cent, with Brent Crude rising over 1.2 per cent to $66.27 per barrel, while WTI Crude saw an increase of nearly 1.4 per cent, trading at $62.59 per barrel.
The Federal Reserve’s September meeting minutes revealed a cautious but clear inclination among policymakers to begin lowering interest rates further this year, though concerns over persistent inflation continue to temper the pace of any policy shift.
The ongoing federal government shutdown in the US, triggered by a budget impasse, has delayed the release of key economic data, including labor market figures that could shape expectations for the Fed’s rate path.
At the same time, mounting signs of a slowdown in the labor market are reinforcing bets on monetary easing. The Fed is expected to cut rates by 25-basis-point at the Bank’s Oct. 29 meeting, with a 78% probability of another cut in December.
Minutes from the Fed’s latest meeting, released Wednesday, showed policymakers seeing room for further easing this year. Nearly all officials supported lowering rates by 25 basis points in September, and most considered additional cuts appropriate for the remainder of 2025.
Fed Chair Jerome Powell’s pre-recorded remarks at the Community Bank Conference in Washington due later in the day are also being closely watched. Lower borrowing costs are expected to support economic growth and lift demand in oil-intensive sectors, analysts said.
Meanwhile, the EU Council announced that member states have approved the European Commission’s “ReArm Europe” program, aimed at boosting defense spending by €800 billion to strengthen the bloc’s military capabilities.
Talks with the European Parliament are expected to begin soon, with an agreement targeted by the end of 2025. The program, unveiled in March, allows more fiscal flexibility and funding for member states’ defense investments, adding to market risk appetite and supporting prices.
On the supply side, falling US gasoline inventories pointed to robust demand in the world’s biggest consumer, lending upward support to oil prices.
Gasoline stocks, fell by 1.6 million barrels to 219.1 million barrels over the same period, signaling strong consumption, according to data from the Energy Information Administration (EIA).
While commercial crude oil stocks rose by 3.7 million barrels last week to 420.3 million barrels, compared with expectations for a 2.78 million-barrel build. Strategic petroleum reserves also increased by 300,000 barrels to 407 million barrels.
