Oil Prices Decline Amid Demand Concerns

SadaNews- Oil prices fell during trading on Thursday, September 18, following the U.S. Federal Reserve's decision to implement its first interest rate cut of the year, amid concerns regarding crude demand levels.

In trading terms, Brent crude futures dropped about 0.3% to $67.76 per barrel, while U.S. crude contracts fell by 0.4%, recording $63.81 per barrel.

The U.S. Federal Reserve cut the interest rate by 25 basis points, indicating that it will gradually lower borrowing costs for the remainder of the year as policymakers respond to signs of weakness in the labor market. Usually, a decrease in borrowing costs boosts demand for oil.

However, on the other hand, data from the U.S. Energy Information Administration revealed a sharp decline in crude oil inventories last week, with net imports dropping to a record low while exports surged to their highest level in nearly two years.

Nevertheless, the increase in distillate inventories by four million barrels, against market expectations of one million barrels, raised concerns about demand in the world's largest oil consumer, putting pressure on prices.

Claudio Galimberti, senior economist and global market analysis director at Rystad Energy, stated in a note conveyed by Reuters that the discussion of further cuts indicates the Fed sees the risks to the economy from unemployment as much higher than the risks of inflation.

He added, "For Brent crude in particular, the expected cut and the two reductions anticipated by the end of the year will be supportive factors for the rise, which will partially confront OPEC+'s strategy to increase production."