Oil News: U.S. Fed Rate Cut Lifts Prices, But China’s Demand Concerns Linger

Light Crude Oil Futures Test Key Resistance Levels

Light crude oil futures climbed on Thursday as traders pushed prices toward a critical resistance zone at $69.79 to $72.21. This pivot area is crucial for breaking through the 200-day and 50-day moving average resistance cluster, which lies at $72.89 to $72.90. Currently, the market is holding above the lower Fibonacci pivot at $69.79, positioning it as key support. However, if this support gives way, traders could see downside risk to the next support level at $67.54.

At 10:51 GMT, Light Crude Oil Futures are trading $70.45, up $0.57 or +0.82%.

Oil Prices Rise After U.S. Interest Rate Cut

Crude oil prices increased on Thursday following a significant interest rate cut from the U.S. Federal Reserve. Brent crude, however, remained near its lowest point this year, trading below $75 per barrel. The interest rate cut of 50 basis points was expected to stimulate economic activity and energy demand, but market sentiment remains cautious, largely due to weaker global demand expectations.

The U.S. labor market’s weakness, hinted at by the Federal Reserve’s decision, also added to concerns about a slowing U.S. economy. ANZ analysts noted that while the rate cut signaled tough economic conditions ahead, bearish traders were frustrated by the Fed’s raised medium-term outlook on rates, leaving the market in a state of uncertainty.

China’s Economic Slowdown Weighs on Demand

China’s slowing economy continued to drag on oil prices. Weak refinery output and slowing industrial growth have raised concerns over the country’s oil demand. August marked the fifth consecutive month of reduced refinery output in China, according to the latest data. Additionally, industrial output growth dropped to a five-month low, with retail sales and new home prices also declining.

Despite these bearish indicators, Citi analysts forecast a potential recovery in Chinese oil demand, expecting it to increase by 300,000 barrels per day in the fourth quarter, driven by improved refinery runs and the launch of new refining projects like Shandong Yulong Petrochemical.

Geopolitical Tensions in the Middle East Add to Market Uncertainty

Oil markets were also monitoring developments in the Middle East, where tensions rose following a series of explosions involving communication devices used by Hezbollah. Israeli security sources linked the events to the Mossad, heightening concerns about a potential escalation in the region’s already volatile geopolitical landscape.

Market Forecast: Cautious Bullish Outlook

Despite headwinds from China’s slowing economy and mixed signals from the U.S. Federal Reserve, light crude oil futures may see further gains if they manage to break through the current resistance cluster around $72.90. The combination of potential demand recovery in China and geopolitical risks in the Middle East could provide near-term support to oil prices. Traders should remain cautious, however, as a failure to hold support at $69.79 could signal a bearish shift toward $67.54. For now, the short-term outlook remains cautiously bullish.