Oil prices closed lower on Friday but gained for a second straight week, supported by a U.S. interest rate cut and lower U.S. supply.
Brent futures fell 39 cents, or 0.52%, to $74.49 a barrel. WTI crude futures fell 3 cents, or 0.4%, to $71.92.
Signs of a slowing economy in China capped gains. But both indexes rose more than 4% for the week.
Prices have rebounded after Brent fell below $69 for the first time in nearly three years on Sept. 10.
The market concluded that a sub-$70 level combined with hedge funds holding a record weak belief in higher prices of crude and fuel products would require a recession to be justified, a risk this week’s bumper U.S. rate cut helped reduce.
Prices rose more than 1% on Thursday, a day after the U.S. central bank decided to cut interest rates by half a percentage point.
Interest rate cuts typically boost economic activity and energy demand, but some analysts are concerned about weakness in the U.S. labor market.
The U.S. interest rate cuts have boosted risk sentiment, weakened the dollar, and supported crude. But, it takes time for rate cuts to boost economic activity and oil demand growth.
The Fed has forecast another 50 basis points of rate cuts by the end of this year, a full percentage point next year, and another half percentage point in 2026.
The Fed’s decision to cut interest rates and the impact of Hurricane Francine are the only two things holding the market together right now. The prospect of another 50 to 75 basis point increase is giving markets hope for some economic stability.
The U.S. Bureau of Safety and Environmental Enforcement said in its latest storm update on Thursday that about 6% of U.S. Gulf crude production and 10% of natural gas production were offline in the wake of Hurricane Francine.
Additional support for oil prices came after U.S. crude inventories fell to a one-year low last week.
Rising tensions in the Middle East have further buoyed the oil market, raising the risk of supply disruptions. Israel announced Friday that it had killed a senior Hezbollah commander and other senior figures in the Lebanese movement in an airstrike in Beirut.
As fears of a wider war grow, it is thought-provoking that the oil market would resort to such brutality. If the global economy is in a state of incompetence, is the solution to slaughter innocent people? The people who consume this commodity, when they consume it, its price goes up, and/but when consumption decreases, it is the people who must die! Isn’t it a cruel dilemma?
US President Joe Biden said that reaching a ceasefire agreement in Gaza is realistic. That’s the same for all leaders, should we take their rhetoric seriously?
Refinery production in China slowed for a fifth straight month in August, with industrial output growth hitting a five-month low.
China also issued its third and likely final fuel export quota of the year, keeping volumes at 2023 levels. The move suggests that refinery margins are too weak to justify increased activity.
Meanwhile, oil refiners in Asia, Europe, and the US are facing multi-year lows in profitability.
