Oil Muted On Fed Cuts As Fitch Predicts Crude At $70 Per Barrel For 2025

Meanwhile, futures are headed for the narrowest annual price range since 2019: File Image/Pixabay 

Oil prices on Wednesday remained firmly range bound, with a confirmed U.S. stock draw and the U.S. Federal Reserve cutting interest rates failing to shift overall sentiment away from worry over world economies and demand.

After the Fed announced its latest cuts but signalled it would slow the pace of subsequent cuts to just two quarter percentage points in 2025, Brent settled up 20 cents to $73.39 per barrel; West Texas Intermediate settled up 50 cents to $70.58.

This combined with investors' reaction to the Energy Information Administration reporting that crude stocks and distillate inventories declined while gasoline stocks climbed, caused Phil Flynn, senior market analyst at Price Futures Group Inc., to state, "The market seems to have turned a corner from all the negativity we saw a couple weeks ago as there is more optimism about demand."

Bloomberg had a different take on the oil market. "Futures are headed for the narrowest annual price range since 2019, marking an abrupt halt to years of bumper swings following the global pandemic and the wars in Ukraine and the Middle East," it stated on Wednesday.

Strategists at Macquarie pointed out in a note that last week oil prices climbed on "tighter Russian sanctions risk, the fall of the Assad regime in Syria, Chinese stimulus efforts, and a potential short squeeze in the physical market."

However, "the uncertainty on the impact and duration of the drivers listed above limited the upside, especially given the heavy balances anticipated for 2025."

Contributing to the gloom was Fitch Ratings, which on Wednesday forecast that oil prices would average $70 per barrel compared to this year's $80 per barrel average, "due to moderating demand growth and higher production from non-OPEC+ countries, leading to oversupply."

Still, there remained enough evidence to throw into question whether the persistent bearishness plaguing the energy sector is oversold, for example: the latest data released Wednesday by the Joint Organizations Data Initiative showed that Saudi Arabia's crude oil exports rose to a three-month high in October, with 5.92 million barrels per day (bpd) of crude up by 174,000 bpd compared to September.

This was the highest average export volume from Saudi Arabia for three months.