Oil Prices Hold Gains On Fed Rate Cut, Focus Shifts To US-China Trade Progress
The oil market’s mood was buoyed by Trump’s comment that US could cut tariffs on Chinese goods in exchange for Beijing’s pledge to restrict the export of precursor chemicals used to make fentanyl.
Oil prices steadied in early Asian trading on Thursday, clinging to most of their gains from the previous session, as investors awaited the outcome of high-stakes trade talks between the United States and China.
The discussions, which could reshape global economic sentiment, have left markets in a cautious holding pattern.
Brent crude futures slipped just 4 cents, or 0.06 per cent, to $64.88 a barrel by 9:30 AM, following a 52-cent rise on Wednesday. US West Texas Intermediate (WTI) crude futures edged down 9 cents, or 0.15 per cent, to $60.39 after climbing 33 cents in the previous session, reported Reuters.
US President Donald Trump and Chinese leader Xi Jinping met for nearly two hours at a South Korean air base in Busan. While the outcome was not immediately disclosed, traders are betting on progress toward easing the prolonged trade tensions that have dampened global demand forecasts.
“Any progress towards a trade agreement could bolster market confidence and stimulate global energy demand, providing some upside to oil,” said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm.
Trade Talks and Tariff Hopes
The oil market’s mood was further buoyed by Trump’s comment that Washington could cut tariffs on Chinese goods in exchange for Beijing’s pledge to restrict the export of precursor chemicals used to manufacture the synthetic opioid fentanyl. The move, if realised, could help reset relations between the world’s two largest economies and restore confidence in global trade flows.
Meanwhile, investors found some comfort in the latest US Federal Reserve decision. The Fed trimmed interest rates on Wednesday as widely expected, though it signalled that it may be the final cut of the year, citing uncertainties caused by the ongoing government shutdown, which threatens to delay key economic data releases.
“The Fed’s decision underscores a broader turn in its policy cycle, one that favours gradual reflation and support over restraint, providing a tailwind to commodities sensitive to economic activity,” said Claudio Galimberti, chief economist at Rystad Energy.
Inventory Draw and OPEC+ Watch
Oil’s earlier gains were also supported by a sharper-than-anticipated fall in US crude and fuel inventories. The Energy Information Administration (EIA) reported that crude stockpiles fell by 6.86 million barrels to 416 million barrels in the week ending October 24, far exceeding analyst expectations of a modest 211,000-barrel decline.
Despite the midweek lift, both Brent and WTI remain on track for a roughly 3 per cent decline in October, their third straight monthly drop. Persistent supply growth and economic headwinds have kept a lid on prices even as inventories tighten.
Attention now turns to the upcoming OPEC+ meeting on November 2. The alliance of oil producers is widely expected to announce a fresh supply increase of 137,000 barrels per day for December.
Since April, OPEC+ has collectively added over 2.7 million barrels per day to global supply, equivalent to about 2.5 per cent of worldwide output, partially unwinding the 5.85 million barrels per day in production cuts agreed upon in previous years.
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