Oil Continues To Sink On Chance Of Fed Freezing Cuts In 2025

But recent reports suggest the market is more resilient than investors may think: File Image/Pixabay

Steadfastly concerned about dour demand prognostications and shrugging off signs that things may not be as bad as analysts fear, investors on Thursday caused another dip in oil prices, this time by about 1 percent.

Brent settled down 51 cents, or 0.7 percent, at $72.88 per barrel, while West Texas Intermediate settled down 67 cents, or 1 percent, to $69.91 per barrel; the more active WTI February contract fell 64 cents to $69.38 per barrel.

Thursday's hand-wringing was mainly due to U.S. Federal Reserve chair Jerome Powell warning that stubborn inflation would make the U.S. central bank more cautious about cutting rates any further next year.

Alex Hodes, analyst at commodities brokerage StoneX, said, "A less accommodative Fed in 2025 than initially expected has markets adjusting their expectations."

Bloomberg noted that heading into 2025, "traders are weighing a looming supply glut and lackluster Chinese demand with geopolitical risks, such as the chance President-elect Donald Trump moves to restrict Iranian supply."

But fudging any clear understanding of the health of the oil market fundamentals-wise are oil analysts who seem to have downplayed recent signs of, if not outright bullishness, then far more resiliency than has been portrayed of late.

This week, these signs included: Saudi Arabia's crude oil exports rising 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; and solid composite PMI reports in Europe and the U.S.

Positive signs the previous week included Phil Flynn, senior market analyst with Price Futures Group Inc., stating that, "Hedge funds are starting to buy on tightness of supply in European markets this winter."

Also last week, Rapidan Energy Group declared that oil is set for a new boom period from the middle of the next decade, thanks to continued demand growth in China and elsewhere.

Bob McNally, founder of Rapidan, stated in a report, "As expectations of a 2030 peak in global demand recede, the reality of a structurally short supply side will come into view; spare capacity dwindles by 2035 and prices enter a boom cycle."

The report went on to postulate that global gasoline consumption will keep growing through to 2035, even in the EV mecca of China, and that there's "no end in sight" for consumption of the motor fuel.