Oil prices rose today, recovering some of the losses incurred in the previous session, on hopes that a possible U.S. interest rate cut would boost economic activity and fuel demand, but lingering concerns about slowing global demand capped gains. Brent crude futures rose 17 cents, or 0.2%, to $79.93 a barrel by 00:29 GMT.U.S. West Texas Intermediate crude rose 23 cents, or 0.3%, to $77.21 a barrel, falling more than 1% on Wednesday after the announcement that U.S. crude inventories rose unexpectedly and fears of a widening conflict in the Middle East receded. “We saw a correction in Asian trading, as the oil market was oversold on Wednesday,” said Nomura Securities economist Yuki Takashima, adding that investors are betting that the Federal Reserve may start cutting interest rates next month. “However, oil prices are expected to remain under pressure in the coming period as fears of slowing global demand persist, especially in China,” he said, expecting WTI crude to head towards $72 in early August.US crude oil inventories rose 1.4 million barrels in the week ended Aug. 9, August, compared with estimates of a 2.2-million-barrel decline, rising for the first time since late June, data from the U.S. Energy Information Administration showed on Wednesday. Earlier this week, the International Energy Agency trimmed its estimate for oil demand growth in 2025, citing the impact of a weaker Chinese economy on consumption. This came after OPEC lowered its demand forecast for 2024 for similar reasons. Earlier this week, the International Energy Agency trimmed its estimate for oil demand growth in 2025, citing the impact of a weaker Chinese economy on consumption. This came after OPEC lowered its demand forecast for 2024 for similar reasons.
The impact of US interest rate cuts on oil prices
Lowering U.S. interest rates has multiple effects on oil prices, through various channels related to global economic activity and finance. When the Federal Reserve cuts interest rates, it seeks to stimulate the economy by making borrowing cheaper. This encouragement to borrow can boost investment and consumer spending, increasing overall economic activity. As a result, demand for energy and fuel rises, including in that oil, leading to an increase in oil prices. When interest rates are low, the cost of borrowing becomes lower for businesses and consumers alike. Companies may invest more in expanding their businesses or in new projects, increasing demand for oil as an energy source. Similarly, consumers may spend more on oil-dependent goods and services, such as transportation and heating, boosting oil demand. Moreover, lowering interest rates can affect the value of the US dollar. Lowering interest rates usually reduces the dollar’s attractiveness as an investment currency, which can lead to its depreciation. When the dollar falls, oil, which is priced in dollars, becomes cheaper for foreign investors. This change could increase global demand for oil, as oil becomes cheaper to buy for buyers outside the United States. Global oil prices. On the other hand, lowering interest rates may have an indirect effect on inflation expectations. When there is increased economic stimulus, investors may expect higher prices for goods and services, including oil. This forecast could lead to higher oil prices as the market reacts to hopes of increased demand. However, the impact is not always minor or direct. There are other factors that may affect the relationship between interest rates and oil prices, such as changes in global oil supply and demand, geopolitical crises, and the production policies of OPEC and other producing countries.
Impact of the global economic outlook on oil prices
The global economic outlook plays a crucial role in determining oil price trends, as changes in the outlook for the global economy can significantly affect demand and supply, and therefore oil prices. When the global economic outlook is positive, it reflects optimism about economic growth and an increase in global economic activity. At times like these, demand for oil is expected to rise, as businesses and consumers seek to consume more energy to support their activities. This rise in demand can It leads to an increase in oil prices as a result of the fact that supply may not be sufficient to meet this growing demand. Conversely, when the global economic outlook is negative, it indicates a slowdown in economic growth or even a possible recession. Such forecasts could reduce demand for oil, as companies may reduce their production and investment operations, and consumption by consumers may decline as a result of spending cuts. As demand falls, oil prices may come under downward pressure, as supply exceeds demand or remains steady while consumption declines.
Other factors affecting the outlook for the global economy include geopolitical tensions, financial crises, changes in trade policies, and geopolitical developments. For example, economic crises in major economies, such as China or the United States, can lead to significant changes in the outlook for oil demand, which is reflected in global oil prices. Geopolitical tensions may also affect oil prices indirectly by affecting supply, as political crises in oil-producing regions may lead to disruptions in production or transportation, causing price fluctuations. Also, changes in trade and tariff policies can affect global oil trade. The imposition of tariffs or trade restrictions can reduce global oil trade, affecting prices based on changes in supply and demand.
