WTI posts modest gains to near $69.50 as US crude stocks fall

• WTI trades with mild gains near $69.50 in Thursday’s Asian session.
• A cautionary tone by the Fed and Chinese sluggish demand concerns undermine the WTI price.
• US crude oil stocks fell less than expected last week, according to the EIA

The US crude oil benchmark, West Texas Intermediate (WTI), is currently trading at approximately $69.50 on Thursday. On Wednesday, the US Federal Reserve (Fed) reduced its key interest rate by a quarter percentage point, and the WTI price posted modest gains. Additionally, US crude inventories decreased. Nevertheless, the black gold’s potential for growth may be limited by the indication that the US central bank intends to reduce the rate of reduction.

At its December meeting on Wednesday, the Federal Reserve implemented its third consecutive rate reduction of 2024, lowering the federal funds rate by 25 basis points (bps). The US central bank indicated that it would reduce the tempo of the easing cycle due to the potential for inflation from the policies of US President-elect Donald Trump and sticky inflation.

The Federal Reserve officials suggested that it is likely that the rate will be reduced by only twice in 2025. This, in turn, increases the value of the Greenback and applies some selling pressure to the USD-denominated commodity price by increasing the cost of crude in other countries, which may decrease demand.

Furthermore, the WTI price may be influenced by the worries regarding the decline in consumer expenditure in China, the world’s largest oil importer. Robert Yawger, director of the energy futures division at Mizuho Securities USA, observed that the China data had generated bearish momentum, which effectively shattered any aspirations speculators had of breaking out of the two-month range to the upside.

The WTI may receive some support as a result of the decrease in US crude inventories that occurred last week. The Energy Information Administration (EIA) weekly report showed crude oil stockpiles in the United States for the week ending December 13 declined by 934,000 barrels, compared to a fall of 1.7 million barrels in the previous week. The market consensus predicted that the number of barrels in circulation would decline by 1.425 million.