DTN Oil Update
Oil Futures Bearish on Expectations of High Inflation
HOUSTON (DTN) -- The futures market remained lower on Thursday, reacting to expectations of high inflation levels for 2025, as the Federal Reserve announced Wednesday that there will be a lower number of interest rate cuts next year. â?¯
The Federal Reserve cut interest rates by 25 basis points (bp) Wednesday, in a move that was much anticipated by the market. The Federal Reserve's expectations that the range for the federal funds rate will be around 4.25%-4.50%, above its 2% target, was not well received by market participants as inflationary pressures will continue affecting the U.S. economy.
The Fed kept its projection of 4.4% inflation for this year but revised it downward for 2024 to 3.9% from 4.3%, projected in September.â?¯
On Wednesday, the Energy Information Administration data showed a drop in crude inventories, lower than expected, despite a hike in exports on the week ended Dec. 13, which also contributed to the bearish mood in the oil markets.
Commercial crude oil inventories in the U.S. fell by 900,000 barrel (bbl) to 421 million bbl in the week ended Dec. 13, according to EIA. Meanwhile, crude exports rose by 1.8 million bpd to 4.9 million bpd, from last week.
However, gasoline stocks climbed by 2.3 million bbl to reach 222 million bbl, indicating a soft demand despite low seasonal prices.â?¯Distillate fuel inventory declined 3.2 million bbl compared to last week, reaching 118.2 million bbl, the same EIA data showed.
But the perspective of sluggish global oil demand for next year, driven by China, have also added pressure to the crude benchmarks in recent days, despite the OPEC+ extending its production cuts until March, China's pledge to implement a loose monetary policy, and the announcement of additional sanctions on Russia last week.
At 8:23 a.m. EST, NYMEX January WTI futures fell $0.02 to $70.56 bbl. The February Brent contract dropped $0.06 to $73.33. Downstream, NYMEX January ULSD futures rose $0.0082 to $2.2468 gallon while NYMEX January RBOB futures were at $1.9410 gallon up $0.0018.
Maria Eugenia Garcia can be reached at Maria.Garcia@dtn.com
