Oil Falls as Dollar Surges on Fed Outlook for Fewer Rate Cuts

By Bloomberg

Dec 19, 2024

image is BloomburgMedia_SOPPC5T1UM0X00_19-12-2024_06-57-29_638701632000000000.jpg

A natural gas flare burns near an oil pump jack at the New Harmony Oil Field in Grayville, Illinois, US, on Sunday, June 19, 2022. Top Biden administration officials are weighing limits on exports of fuel as the White House struggles to contain gasoline prices that have topped $5 per gallon. Photographer: Luke Sharrett/Bloomberg

(Bloomberg) -- Oil edged lower as expectations for fewer interest-rate cuts by the Federal Reserve next year boosted the dollar.

Brent crude fell to near $73 a barrel while West Texas Intermediate traded around $70. Fed officials lowered borrowing costs as expected on Wednesday, but reined in the number of reductions they expect to make in 2025. The dollar rallied to its strongest level in more than two years, making commodities more expensive for most buyers.

Crude had risen on Wednesday after US nationwide inventories fell for a fourth week. Prices have been stuck in a fairly narrow range since the middle of October, with traders weighing a lackluster Chinese demand outlook and surging production from outside OPEC+ against geopolitical risks and the chance President-elect Donald Trump will move to restrict Iranian supply.

“The oil market is reviewing 2025 balances and becoming incrementally less bearish,” Macquarie analyst Vikas Dwivedi said in a note. Brent at $70 a barrel seems to be a “fundamental and technical support” level, he said.

The relative calm means crude futures are set 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.

By Yongchang Chin