Oil prices rise after Fed delivers big interest-rate cut

By William Watts

Oil futures ended higher Thursday, gaining ground alongside global equities and other assets perceived as risky, a day after the Federal Reserve delivered a large interest-rate cut and set the stage for further easing of monetary policy.

The Fed's moves were seen as soothing worries over an economic downturn, blunting concerns about a hit to energy demand.

Price moves

West Texas Intermediate crude for October delivery CL.1 CLV24 rose $1.04, or 1.5%, to end at $71.95 a barrel on the New York Mercantile Exchange. The more actively traded November contract CL00 CLX24 rose $1.28, or 1.8%, to $71.16 a barrel.November Brent crude BRN00 BRNX24, the global benchmark, gained $1.23, or 1.7%, to settle at $74.88 a barrel on ICE Futures Europe.Back on Nymex, October gasoline RBV25 gained 2.5% to finish at $2.06 a gallon, while October heating oil HOV24 gained 1.1% to $2.172 a gallon.October natural gas NGV24 advanced 2.8%, finishing at $2.348 per million British thermal units.

Market drivers

The Federal Reserve on Wednesday delivered a rate cut of 50 basis points, or half a percentage point, kicking off a cycle of rate cuts as policymakers turn their attention from inflation to concerns about the labor market. While U.S. stocks ended Wednesday's session with a modest decline, global equities rallied and U.S. stocks surged to records on Wall Street on Thursday.

The rate cut "could support economic activity and stimulate energy demand in the U.S., contributing to higher oil prices. However, the large move also sparked concerns about a potential economic slowdown, which could constrain further increases in oil prices," said Joseph Dahrieh, managing principal at Tickmill, in emailed comments.

Market attention is likely to turn back to demand worries, said Warren and Ewa Manthey, commodities strategists at ING, in a note.

"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," they wrote.

Natural gas sank to a session low after the Energy Information Administration reported that working gas in storage rose by 58 billion cubic feet (bcf) in the week ended Sept. 13, but then bounced back into positive territory. Analysts surveyed by S&P Global Commodity Insights had looked for an injection of 55 bcf into storage.

-William Watts

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09-19-24 1529ET

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