Oil News: Crude Rebounds on Rate Cut Hopes but Bearish Demand Outlook Looms

Oil Prices Rebound on Rate Cut Hopes but Global Demand Concerns Linger

Oil prices edged higher on Thursday, partially recovering from Wednesday’s losses as traders bet on potential U.S. interest rate cuts to boost economic activity and fuel demand. However, the market remains under pressure due to persistent concerns about weaker global demand, particularly from China.

At 09:32 GMT, Light crude oil futures are trading $77.44, up $0.46 or +0.60%.

U.S. Rate Cut Speculation Drives Optimism

Recent data has reinforced expectations of a rate cut by the Federal Reserve, which could stimulate the U.S. economy and increase demand for crude oil. U.S. consumer prices rose modestly in July, with the inflation rate dropping below 3% annually for the first time in nearly three and a half years. This moderation in inflation strengthens the case for a September rate cut, a move that traders are already pricing in.

The consumer price index (CPI) rose 0.2% month-over-month in July and 2.9% annually, slightly below the anticipated 3% annual increase. Core CPI, which excludes volatile food and energy prices, also increased by 0.2% from June, matching expectations.

EIA Reports Unexpected Build in U.S. Crude Inventories

The U.S. Energy Information Administration (EIA) reported an unexpected build in crude oil inventories, which also weighed on prices. U.S. crude stockpiles rose by 1.4 million barrels for the week ending August 9, a sharp contrast to the expected drawdown of 2.2 million barrels. This increase marked the first build since late June and suggests that U.S. demand might not be as robust as hoped, adding to the bearish sentiment in the market.

Global Demand Uncertainty Caps Gains

Concerns about global demand, particularly from China, continue to limit upside potential for oil prices. The International Energy Agency (IEA) recently lowered its 2025 oil demand growth forecast, citing China’s sluggish economic performance. OPEC has similarly reduced its 2024 demand growth expectations due to weaker-than-expected Chinese consumption.

China’s crude oil imports fell to their lowest level since September 2022 in July, while refinery throughput dropped for the fourth consecutive month. Despite this decline, China continued to add to its stockpiles, with an estimated 280,000 barrels per day (bpd) going into storage. This build-up suggests that China could further trim imports if global oil prices rise.

Market Forecast: Bearish Outlook Prevails

While speculation around a U.S. rate cut has provided some support, the broader outlook for oil prices remains bearish. Persistent concerns over sluggish global demand, especially from China, and the unexpected rise in U.S. crude inventories are likely to keep prices under pressure. West Texas Intermediate (WTI) is expected to trend toward the $72 mark in the coming weeks, with significant upside potential only likely if geopolitical tensions in the Middle East escalate unexpectedly.

Technical Analysis

Light crude oil futures are trading higher on Thursday but below the 50-day moving average at $78.09. This price is new resistance, The move also indicates that intermediate momentum has shifted to the downside.

Regaining the 50-day MA will signal the return of buyers. This could lead to a retest of this week’s high at $80.16.

Meanwhile, a sustained move under the 50-day MA could lead to a sharp break into the pivot at $75.91, followed by the 200-day moving average at $75.48.