Crude oil futures remained steady on Thursday morning despite the US Federal Reserve having reduced interest rates by 50 basis points on Wednesday.
At 9.57 am on Thursday, November Brent oil futures were at $73.67, up by 0.03 per cent, and November crude oil futures on WTI (West Texas Intermediate) were at $69.85, down by 0.04 per cent.
September crude oil futures were trading at ₹5924 on Multi Commodity Exchange (MCX) during the initial hour of trading on Thursday against the previous close of ₹5913, up by 0.19 per cent, and October futures were trading at ₹5866 against the previous close of ₹5840, up by 0.45 per cent.
Federal Open Market Committee (FOMC) of the US Federal Reserve on Wednesday decided to lower the target range for the federal funds rate by 50 basis points to 4.75-5 per cent per cent. This was the first reduction in interest rates since March 2020. While the market was expecting an interest rate cut, there was speculation whether it would be a 25 basis points cut or 50 basis points cut.
In their Commodities Feed, ING Think’s Warren Patterson, Head of Commodities Strategy, and Ewa Manthey, Commodities Strategist, said while oil prices saw a brief spike following the Fed’s 50 basis points rate cut, the market settled marginally lower on Wednesday. Expectations for a 50 basis points cut had grown in recent weeks, so the move was largely priced in, they said.
“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,” they said.
Meanwhile, the data released by the US EIA (Energy Information Administration) for the week ending September 13 showed a decline in crude oil inventories in the US. According to the US EIA, commercial crude oil inventories decreased by 1.6 million barrels from the previous week. At 417.5 million barrels, US crude oil inventories were about 4 per cent below the five-year average for this time of year. Total motor gasoline inventories increased by 0.1 million barrels from last week and were slightly below the five-year average for this time of year.
Total products supplied over the last four-week period averaged 20.3 million barrels a day, down by 2.7 per cent from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.9 million barrels a day, up by 1.1 per cent from the same period last year.
ING Think’s Commodities Feed also said that the US administration is looking to buy 6 million barrels of crude oil for the strategic petroleum reserve (SPR) for delivery February-May 2025. Given the recent weakness in oil prices, it makes sense for the Department of Energy (DoE) to increase purchases to refill the SPR. The DoE’s target price is below $79.99 a barrel, while WTI early 2025 forwards are trading sub-$69 a barrel currently, the Feed said.
September aluminium futures were trading at ₹232 on MCX during the initial hour of trading on Thursday against the previous close of ₹230.75, up by 0.54 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), September guargum contracts were trading at ₹10798 in the initial hour of trading on Thursday against the previous close of ₹10599, up by 1.88 per cent.
September cottonseed oilcake futures were trading at ₹3860 on NCDEX in the initial hour of trading on Thursday against the previous close of ₹3792, up by 1.79 per cent.
