Oil Prices Trim Losses, Staying on Course for Weekly Gains After Significant Fed Rate Cut

Oil prices recovered somewhat on Friday, positioning themselves for a weekly gain after a significant interest rate cut by the U.S. helped alleviate some concerns about diminishing demand.

As of 1:43 p.m. ET, Brent crude rose by 0.01% to $74.89 per barrel, while West Texas Intermediate (WTI) increased by 0.3% to $71.39 per barrel.

### Oil Prices on the Rise Following Rate Cut

Crude prices have bounced back notably from the near three-year lows experienced earlier in September. Much of this recovery has occurred this week, coinciding with a decline in the dollar following the Federal Reserve’s recent decision on interest rates.

Both Brent and WTI futures are up approximately 4% for the week.

Escalating geopolitical tensions in the Middle East have also contributed to the rise in crude prices, particularly after Israel conducted strikes in Beirut, claiming to have killed a prominent Hezbollah commander. Earlier, Israel allegedly targeted devices used by Hezbollah, which prompted vows of retaliation. Additionally, ongoing fighting in and around Gaza continued to heighten these tensions.

A softer dollar has supported oil prices as well, following the Fed’s interest rate cut, which exceeded market expectations and indicated the potential for an easing cycle. Traders are hopeful that this will stimulate economic growth in the upcoming quarters, as lower rates are generally seen as favorable for economic activity, thus boosting crude demand.

### Rig Count Remains Steady

The number of active oil rigs in the U.S. remained unchanged at 488 this week, as reported by energy services firm Baker Hughes. This stable rig count comes after recent disruptions in production caused by Hurricane Francine.

### Ongoing Concerns About China’s Demand

However, concerns regarding China’s demand persist. Economic data from the world’s largest oil importer shows minimal signs of recovery. The People’s Bank of China decided to maintain current interest rates, despite increasing pressure on the government to implement more economic stimulus measures.

Recent statistics revealed that Chinese refinery output slowed for the fifth consecutive month in August, and oil imports remained weak. Anxieties about China have played a significant role in driving oil prices down to a near three-year low earlier this month, limiting any substantial recovery in the crude market.

Analysts at ING highlighted that while China’s situation is a major concern for demand, reports of lower run rates among European refiners due to unsatisfactory margins are also noteworthy.