Oil prices depreciated on Friday as worries about large supplies and declining demand outweighed expectations that the year’s first interest-rate cut by the US Federal Reserve would trigger more consumption.
Brent crude futures settled at $66.68 a barrel after giving up 76 cents or 1.1 per cent and the US West Texas Intermediate (WTI) crude futures finished at $62.68 per barrel after it lost 89 cents or 1.4 per cent.
The Federal Reserve cut its policy rate by a quarter of a percentage point on Wednesday and indicated that more cuts would follow as it responded to signs of weakness in the US jobs market. Lower borrowing costs typically boost demand for oil and push prices higher.
However, market analysts say future Federal Reserve rate cuts of a quarter of a percentage point would likely not boost oil markets because they would further weaken the Dollar, adding that the US central bank would have to be more aggressive than they have been.
There is now a call to increase the cut level by 50 basis-point to boost demand as the Federal Reserve’s action is not translating to growth for the crude market due to underlying market fundamentals.
Also, oil supplies continue to remain robust as the Organisation of the Petroleum Exporting Countries (OPEC) is reducing its oil production cuts.
On the demand side, all energy agencies, including the US Energy Information Administration (EIA), have signaled concern about weakening demand, tempering expectations of significant near-term price upside.
Meanwhile, Bloomberg reported that India will continue to buy Russian crude in the coming months, with active purchases for cargoes loading in November and December.
The tensions of the past weeks between the US and India over the latter’s continued purchases of Russian crude oil appeared to ease this week after US President Donald Trump held a phone call with India’s Prime Minister Narendra Modi to wish him a happy birthday and thank him for efforts to end the war in Ukraine.
Indian refiners, including the state-owned ones, are back to buying Russian crude, although they are hedging their bets with procurement of more volumes from the US, Brazil, and Nigeria among others.