Oil prices dropped in Asian trading on Thursday after the US Federal Reserve’s larger-than-expected interest rate cut raised concerns about the state of the US economy. Brent crude futures for November fell by 34 cents (0.46%) to $73.31 per barrel, while West Texas Intermediate (WTI) crude futures for October declined by 42 cents (0.59%) to $70.49 per barrel by 0015 GMT.
The US central bank slashed interest rates by 50 basis points on Wednesday, which pointed to a slowing job market and raised fears about economic growth. Despite the usual boost interest rate cuts provide to economic activity, investors appeared more focused on the potential economic slowdown.
“While the 50 basis point cut hints at harsh economic headwinds ahead, bearish investors were left unsatisfied after the Fed raised the medium-term outlook for rates,” said analysts at ANZ.
Concerns about weak demand from China, which is experiencing a slowdown in industrial output and refinery activity, also weighed on prices. Data revealed that China’s refinery output decreased for the fifth consecutive month in August, while industrial production and retail sales continued to weaken.
However, analysts from Citi projected that Chinese oil demand could see a rebound by 300,000 barrels per day year-on-year in the fourth quarter, driven by improved refinery activity and new projects like the Shandong Yulong Petrochemical refinery.
This mixed outlook left oil prices volatile as traders balanced global demand concerns with potential future support.
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