(Bloomberg) — Oil declined as signs of weak US demand added to bearish headwinds, offsetting a steep interest-rate cut from the Federal Reserve and escalating tensions in the Middle East.
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Brent futures traded near $73 a barrel and West Texas Intermediate was close to $70. US gasoline demand dropped further below 9 million barrels and jet fuel consumption ebbed for the third straight week, according Energy Information Administration data released Wednesday.
The global benchmark has fallen by around 15% this quarter on concerns over China’s economic slowdown and plentiful global supply. The Fed cut its policy rate by 50 basis points on Wednesday, but Chair Jerome Powell cautioned that no one should see this as a “new pace.”
“Crude’s buoyancy earlier this week was from expectations of a bumper Fed rate cut,” said Vandana Hari, the founder of Vanda Insights in Singapore. “Now that it has been delivered, attention is likely to return to oil market fundamentals, which are weak.”
In the Middle East, Israel’s Defense Minister Yoav Gallant declared what he called a “new phase” in the war with regional Islamist groups and said troops would be diverted to the Lebanese border. That’s raised concerns about a wider conflict that could involve Iran — an OPEC producer — which provides financial backing to Hamas and Hezbollah.
Shrinking US inventories could also provide some impetus for oil prices to rise. Crude stockpiles at the key storage hub at Cushing, Oklahoma, are significantly lower than the five-year seasonal average and close to what’s considered “tank bottom” levels, according to EIA data.
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