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19/12/24
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WTI Crude Oil Gains Amid Caution over Demand and Fed Outlook
West Texas Intermediate (WTI) crude oil is experiencing slight gains, hovering around $69.50 during Thursday’s Asian trading session. Despite the modest upward movement, concerns regarding sluggish demand from China and a cautious outlook from the Federal Reserve continue to pose challenges to the price of WTI. Recent data indicates that US crude oil inventories declined less than anticipated last week, further influencing market sentiments.
On Wednesday, the Federal Reserve announced its third consecutive interest rate cut of 2024, lowering the federal funds rate by 25 basis points. While this move has the potential to provide a boost to the economy, the Fed also indicated a more measured approach moving forward, suggesting that further reductions might be limited in the future. The central bank’s careful stance reflects concerns about persistent inflation and potential inflationary pressures from policy proposals by US President-elect Donald Trump. Such developments have exerted upward pressure on the US dollar, which can negatively impact the price of oil, making it more expensive for buyers in other countries.
Another factor weighing on WTI prices is the decline in consumer demand in China, the largest importer of crude oil globally. Given this context, the market is grappling with negative momentum stemming from disappointing economic indicators out of China, which have diminished hopes of a breakout in oil prices after a two-month trading range.
Despite these challenges, a decline in US crude inventories reported by the Energy Information Administration (EIA) may lend some support to WTI. For the week ending December 13, crude oil stockpiles fell by 934,000 barrels, a smaller decrease compared to the previous week’s drop of 1.7 million barrels. Market analysts had anticipated a larger reduction of about 1.425 million barrels, leaving the balance of supply and demand in a state of cautious observation amidst broader economic uncertainties.
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