Oil prices fell on Friday as concerns about high supply and declining demand overshadowed expectations that the Fed’s first interest rate cut of the year would trigger more consumption.
Brent crude futures closed down 76 cents, or 1.1%, at $66.68 a barrel. WTI crude futures fell 89 cents, or 1.4%, at $62.68.
However, both indices are up for the second consecutive week.
Oil supply remains strong, and OPEC is easing its oil production cuts. Sanctions have not had a significant impact on Russian crude exports.
The Fed cut its policy rate by a quarter point on Wednesday and indicated further cuts in response to signs of weakness in the US labor market.
Lower borrowing costs generally increase oil demand and raise prices.
Future quarter-point rate cuts by the Fed are unlikely to stimulate oil markets because they will further weaken the dollar, making oil more expensive to purchase.
The Fed’s move is not translating into growth in the crude oil market due to underlying market dynamics, and it needs to be more aggressive than before. A higher rate cut is needed to boost demand.
All energy agencies, including the U.S. Energy Information Administration (EIA), are expressing concern about weakening demand, tempering expectations of significant price increases in the near term.
Refineries shut down production units for maintenance, also known as rebuilds, in the spring and fall. This period will further reduce demand.
A larger-than-expected 4 million barrel increase in U.S. distillate inventories has raised concerns about demand in the world’s largest oil consumer and suppressed prices.
Recent economic data has fueled concerns as the U.S. job market weakens, and single-family home construction fell to its lowest level in years in August due to a glut of unsold new homes.