Oil Heads for Biggest Weekly Gain Since February After Fed Cut

Oil prices have witnessed a remarkable surge this week, heading for their largest weekly gain since February. The Federal Reserve's recent rate cut has sparked a wave of optimism in the oil market, with investors eagerly anticipating the potential boost to demand. As of Friday, Brent crude oil futures were up by 1.4% at $80.74 a barrel, while West Texas Intermediate (WTI) crude oil futures were trading 1.3% higher at $75.16 a barrel.

The Fed's rate cut has injected a sense of confidence into the market, with traders expecting a boost in demand for oil as a result. However, it is essential to note that the rate cut was largely priced in by the market, and the actual impact on oil prices may be limited. Nonetheless, the psychological boost has been sufficient to drive prices higher.

The Strategic Petroleum Reserve (SPR) refill by the US administration is another factor contributing to the rally in oil prices. The US plans to buy 6 million barrels of crude oil for delivery between February and May 2025. This move is expected to increase demand for oil, thereby supporting prices.

US crude oil exports and imports have also played a role in shaping the global oil market's balance. US exports grew by 1.28 million barrels per day (bpd) week-over-week, while imports fell by 545,000 bpd. This shift in trade dynamics has contributed to the drawdown in US crude oil inventories, which now stand at their lowest level in a year. The reduced inventory levels have the potential to create noise around inventories nearing tank bottoms and provide some support to prompt WTI timespreads.

In conclusion, the Fed's rate cut has contributed to a surge in oil prices, with the market anticipating a boost in demand. The SPR refill by the US administration and the shift in US crude oil exports and imports have also played a role in supporting oil prices. The EIA's reported drawdown in US crude oil inventories has further impacted WTI timespreads and prompt WTI prices. As the market continues to evolve, investors should remain vigilant to the various factors shaping the global oil market, including refining margins in Europe and demand patterns in China.