Oil Prices Rise after US Interest Rate Cut

A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
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Oil Prices Rise after US Interest Rate Cut

A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo
A pumpjack brings oil to the surface in the Monterey Shale, California, US April 29, 2013. REUTERS/Lucy Nicholson/File Photo

Oil prices rose on Thursday after a large interest rate cut from the US Federal Reserve, but Brent was still hovering around its lowest levels of the year, below $75, on expectations of weaker global demand.

Brent crude futures for November were up 66 cents, or 0.9%, to $74.31 a barrel at 1156 GMT, while WTI crude futures for October were up 58 cents, or 0.8%, to $71.49 a barrel. The benchmarks had earlier risen more than $1 each, Reuters reported.

The US central bank cut interest rates by half a percentage point on Wednesday. Interest rate cuts typically boost economic activity and energy demand, but the market also saw it as a sign of a weaker US labor market that could slow the economy.

"While the 50 basis point cut hints at harsh economic headwinds ahead, bearish investors were left unsatisfied after the Fed raised the medium-term outlook for rates," ANZ analysts said in a note.

The Bank of England on Thursday held interest rates at 5.0%.

Weak demand from China's slowing economy continued to weigh on oil prices.

Refinery output in China slowed for a fifth month in August, statistics bureau data showed over the weekend. China's industrial output growth also slowed to a five-month low last month, and retail sales and new home prices weakened further.

Markets were also keeping an eye on events in the Middle East after walkie-talkies used by Lebanese armed group Hezbollah exploded on Wednesday following similar explosions of pagers the previous day.

According to Reuters, security sources said Israeli spy agency Mossad was responsible, but Israeli officials did not comment on the attacks.

Citi analysts say they expect a counter-seasonal oil market deficit of around 0.4 million barrels per day (bpd) to support Brent crude prices in the $70 to $75 a barrel range during the next quarter, but that would be temporary.

"As 2025 global oil balances deteriorate in most scenarios, we still anticipate renewed price weakness in 2025 with Brent on a path to $60/barrel," Citi said in a note on Thursday.

 

 

 

 

 



Trump’s Copper, Aluminium Tariffs May Raise Costs for US Consumers 

President Donald Trump speaks to reporters aboard Air Force One en route from Miami to Joint Base Andrews, Md., Monday, Jan. 27, 2025. (AP)
President Donald Trump speaks to reporters aboard Air Force One en route from Miami to Joint Base Andrews, Md., Monday, Jan. 27, 2025. (AP)
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Trump’s Copper, Aluminium Tariffs May Raise Costs for US Consumers 

President Donald Trump speaks to reporters aboard Air Force One en route from Miami to Joint Base Andrews, Md., Monday, Jan. 27, 2025. (AP)
President Donald Trump speaks to reporters aboard Air Force One en route from Miami to Joint Base Andrews, Md., Monday, Jan. 27, 2025. (AP)

President Donald Trump's vow of tariffs on US copper and aluminium imports would result in higher costs for local consumers because of a shortfall of domestic production and the length of time it would take to renew the industry, analysts and industry participants said on Tuesday.

In a speech to Republican lawmakers on Monday, Trump said he would impose the tariffs on aluminium and copper - metals that are needed to produce US military hardware - as well as steel, to entice producers to make them in the United States.

"We have to bring production back to our country," he said.

Trump won the US presidency in November vowing to lower costs for consumers still smarting from an inflation surge in the first half of his predecessor Joe Biden's term. However, analysts argue his plan for tariffs on imports to bolster the country's manufacturing sector, another of his promises, may undercut his price-cutting pledge.

It was not clear how broadly the tariffs could be applied, but several mining CEOs have previously said they are preparing for different scenarios as markets brace for a potential change to trade flows.

"There’s a few unknowns here. Will these tariffs be enacted, and at what scale, and who will pay? Ultimately, they generally get paid by the consumer particularly in the case where there’s no domestic substitute," said analyst Daniel Morgan at Sydney investment bank Barrenjoey.

US aluminium and copper smelters have been closing and would need new infrastructure and power contracts to restart, among other measures, all of which take time, he said.

Aluminium producers in Canada such as Rio Tinto and Alcoa would be unlikely to take revenue hits, instead the costs would likely be rolled to automakers who would then pass them to US consumers, he added. Rio Tinto declined to comment.

An Alcoa spokesperson pointed to comments from CEO William Oplinger from a results call last week that flagged the potential for "wide ranging effects on supply, demand and trade flows". He estimated that a 25% tariff on current Canadian export volumes to the US could represent $1.5 billion to $2 billion of additional annual costs for US customers.

An executive at India's top mining lobby group noted the US is the biggest export market for its aluminium, and it expects India's government to take action by convincing Trump not to issue any levies.

"If Trump imposes tariffs, it will have an adverse impact particularly on aluminium because Europe is already on path to impose a carbon tax and the UK might do it too," said B.K. Bhatia, additional secretary general at the Federation of Indian Mineral Industries.

On copper, John Fennell, CEO of the International Copper Association Australia said any tariff on imports to the US would impact its industry given the country is a net copper importer, although it may speed the development of new mines such as Rio Tinto's Resolution in Arizona.

"This could be good for new mines like Resolution but that is many years off, and the pain would be felt by local manufacturers paying the tariffs in the interim," he said.

Freeport-McMoRan CEO Kathleen Quirk said last week that the miner would not be affected by any copper tariffs as they sell all their US copper domestically and their Indonesian metal goes to Asia. But she worried about any potential inflationary effects of copper tariffs.

In Japan, the world's third-largest steel maker, steel and aluminium tariffs during Trump’s previous term had a limited impact, noted Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting.

"The majority of Japan's steel exports are value-added specialty products. And since value-added products were excluded, we expect a similar approach this time. These value-added products are difficult to substitute, making them less likely to be targeted," Akuta said.