Brent gets a boost from US rate cut hopes

The front-month ICE Brent contract has gained by $0.63/bbl on the day, to trade at $62.83/bbl at 09.00 GMT.

IMAGE: Getty Images

Upward pressure:

Brent crude’s price has moved higher following comments from US Federal Reserve (Fed) policymakers on the prospects of a final rate cut before the year ends.

Fed Governor Christopher Waller said the US labour market has softened to justify a final 25-basis-point cut at the central bank’s meeting next month, Reuters reported.

“[Market] expectations of a Fed rate cut were boosted by dovish comments from central bankers,” ANZ Bank’s senior commodity strategist Daniel Hynes said.

Lower interest rates in the US can boost demand, making dollar-denominated commodities like oil cheaper for holders of other currencies.

"Waller fuelled optimism of a rate cut in December, saying concerns about the labour market warrant advocating for a cut at the next meeting," Hynes said.

The US Fed is scheduled to hold its Federal Open Market Committee (FOMC) meeting on 10 December.

Downward pressure:

Brent’s price has come under some downward pressure as market analysts continue to assess the potential impact of a Russia–Ukraine ceasefire – which is now in its third year.

Washington has modified its proposed 28-point plan to achieve a ceasefire deal between Kyiv and Moscow, after European leaders viewed the proposal as leaning in favour of Moscow.

The US administration has claimed that progress has been made in the ceasefire plan that could potentially end the conflict.

According to oil market analysts, these developments could pave the way for easing sanctions on Russian crude, adding more barrels to an already oversupplied market.

Oil prices declined “on the prospect of more supply hitting the market amid easing geopolitical tensions,” Hynes added.

By Aparupa Mazumder

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