Crude oil prices are on track to end the week with a rare gain for the past few months, supported by the Fed's decision to cut the key interest rate by 0.5%.
Both Brent crude and West Texas Intermediate dipped slightly earlier today, in midmorning Asian trade, but look set to end the week higher than they started, with WTI rising from about $69 per barrel to close to $72 per barrel at the time of writing. Brent crude looked set to gain about $2 per barrel over the week.
Oil prices also got support from U.S. crude oil inventories, which fell to the lowest in 12 months last week, per the Energy Information Administration's weekly petroleum status report. This rekindled hopes of higher demand for oil down the line, further supported by Citi's latest supply update, which saw a shortage of 400,000 bpd.
Back to the Fed's rate cut, ING commodity analysts wrote in a note following the announcement that the cut has already been largely priced into benchmarks, saying that "For oil, that means attention will likely turn back to demand worries. China has obviously been the key concern when it comes to demand, but there have also been reports of refiners in Europe cutting run rates due to poor margins."
Indeed, there have been reports that European refiners are cutting their run rates due to weak margins. This, however, does not mean necessarily that demand for fuels is down. Bloomberg just reported yesterday that diesel imports into the European Union and the UK were set to reach the highest in 17 months in September.
The average inflows of diesel and gasoil, the report said, stood at some 1.36 million barrels daily, based on Kpler tanker-tracking data. Maintenance season in the refining industry and the run rate reductions resulting from weak margins tightened supply, even as demand remained subdued compared to previous years due to lower industrial activity.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More