Written by Paul Carsten
(Reuters) – Oil prices rose more than 1% on Thursday after a major interest rate cut by the US Federal Reserve, helping Brent recover from below $69 last week – its lowest all year – to above $74 .
Futures were up 90 cents, or 1.2%, at $74.55 a barrel by 1303 GMT, while WTI crude futures for October delivery were up 88 cents, or 1.2%, at $71.79 a barrel. Benchmarks were up more than $1 each.
The US central bank cut interest rates by half a point on Wednesday. Interest rate cuts typically boost economic activity and energy demand, but the market also saw it as a sign of a weak US labor market that could slow the economy.
“Although the 50-point reduction suggested more severe economic problems ahead, bearish investors were left unsatisfied after the Fed raised its medium-term outlook on rates,” ANZ analysts said in a paper.
The Bank of England on Thursday held interest rates at 5.0%.
Weak demand from China's slowing economy continued to weigh on oil prices.
China's refinery output fell for a fifth month in August, statistics bureau data showed at the weekend. China's industrial output growth also slowed to a five-month low last month, and retail sales and new home prices weakened further.
Markets were also keeping a close eye on events in the Middle East after the explosion of walkie-talkies used by the Lebanese armed group Hezbollah on Wednesday followed a similar explosion of pagers the previous day.
Security sources said the Israeli spy agency, Mossad, was responsible, but Israeli officials did not comment on the attack.
Citi analysts said they expect a seasonally adjusted oil market shortfall of around 0.4 million barrels per day (bpd) to support Brent crude prices in the $70 to $75 barrel range during the next quarter, but that could be temporary.
“As global oil balances for 2025 deteriorate in many cases, we still expect renewed price weakness in 2025 when Brent is on its way to $60/barrel,” Citi said in a statement on Thursday.
