WTI crude oil futures came under downward pressure on Thursday (September 18), sliding toward the lower end of a narrow trading range as traders digested the Federal Reserve's latest interest rate cut. Price fluctuations were limited between resistance at the 50-day moving average ($64.35) and support at the 20-day moving average ($63.69), with no clear signs of a breakout.



Fed cuts rates, but demand outlook remains uncertain

The Federal Reserve announced a 25 basis point interest rate cut on Wednesday, a move that was widely expected. Fed Chairman Jerome Powell said the rate cut marked the official start of a gradual easing cycle to address labor market slack. Although loose monetary policy typically boosts oil demand by lowering borrowing costs, traders remain cautious.

Kuwaiti Oil Minister Tariq Al-Rume expressed optimism, saying the rate cut should boost demand, particularly from Asia. However, market participants were divided. Jorge Montepec of Agate Capital Group said the Fed's move was driven by concerns about slowing US economic growth, rather than necessarily to stimulate demand. Powell's comments regarding increasing downside risks to employment, coupled with his cautious stance on inflation, further complicated market sentiment.

Inventory data added to the pressure, with distillate stockpiles rising, highlighting weak fuel demand.

The bearish sentiment was exacerbated by the latest data from the U.S. Energy Information Administration (EIA). While crude oil inventories fell sharply last week due to record low net imports and exports near a two-year high, distillate inventories unexpectedly rose by 4 million barrels (versus an expected increase of 1 million barrels), flashing a red light for end-user demand.

Despite bullish signals from falling inventories and the overall macro environment being in a rate-cutting cycle, weak U.S. fuel consumption is still curbing oil's upward momentum. Traders are still focusing on short-term technical levels and the mixed demand signals released by domestic and foreign markets.

Outlook: Cautiously bearish below the 50-day moving average


(WTI crude oil daily chart source: Yihuitong)

Until WTI manages to break above its 50-day moving average, the market remains at risk of a downside breakout. A break below its 20-day moving average would intensify the bearish outlook and could accelerate the decline to $60.77.

Ongoing concerns about weak U.S. fuel demand and uncertainty about the effectiveness of the Federal Reserve's policies kept traders on the defensive. The short-term outlook was bearish, with key resistance levels curbing bullish momentum.

At 19:39 Beijing time, WTI crude oil was quoted at US$64.07 per barrel, up 0.58%.