Oil prices dropped in early trading on Thursday after the U.S. Federal Reserve indicated it would slow the pace of interest rate cuts in 2025, raising concerns about potential impacts on fuel demand.
Brent futures declined by 33 cents, or 0.45%, to $73.06 per barrel by 0107 GMT, while U.S. West Texas Intermediate crude fell by 36 cents, or 0.51%, to $70.22.
These losses reversed much of Wednesday’s gains, when prices rose due to a drop in U.S. crude stocks and the Federal Reserve’s anticipated 25 basis point interest rate cut. However, those gains were capped after the central bank adopted a more hawkish stance on the 2025 outlook, dampening market sentiment.
At the December 17-18 policy meeting, Fed officials projected only two quarter-point rate reductions in 2025 due to persistently high inflation, a reduction from the half-point cut they had expected in September.
Lower rates typically reduce borrowing costs, which can stimulate economic growth and boost oil demand.
The Energy Information Administration (EIA) reported a decline in U.S. crude and distillate inventories, while gasoline stocks increased during the week ending December 13. U.S. crude inventories fell by 934,000 barrels, to 421 million barrels, compared with analysts’ expectations of a 1.6 million-barrel draw.
Additionally, the U.S. Environmental Protection Agency approved California’s historic plan to ban the sale of gasoline-only vehicles by 2035, requiring at least 80% of new vehicles to be fully electric by that time. Eleven other states, including New York, Massachusetts, and Oregon, have adopted California’s rules.
