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The Federal Reserve announced its first interest rate cut since 2020,with a magnitude of 50 basis points.
As one of the highly anticipated risk assets,will international oil prices be affected by this interest rate cut?
The reporter noticed that there have been views previously pointing out that from the perspective of pricing effect,there is a negative correlation between international oil prices and the US dollar,that is,after interest rate cuts,the US dollar falls,and oil prices rise.However,from the current situation,the factors affecting the trend of international oil prices are becoming increasingly complex.
The benefits of interest rate cuts for oil prices are only based on theoretical logic.However,in the actual transmission process,international oil prices will take the fundamental conditions of the market itself as the core factor.”The reporter learned from multiple analysts that the commodity attributes of crude oil are relatively obvious,and the current market’s concerns about the prospects of crude oil demand continue to put pressure on oil prices in the short term.
Interest rate cuts increase uncertainty
Regarding the Federal Reserve’s first interest rate cut in nearly four years,it is widely interpreted that the United States will enter a cycle of interest rate cuts from now on.On September 19th,Acting Chief Executive of the Hong Kong Monetary Authority,Li Dazhi,commented that US inflation has generally confirmed a decline,and there have been signs of a slowdown in the labor market recently.Therefore,the Federal Reserve has decided to cut interest rates by 50 basis points,which is roughly in line with market expectations.
However,the ultimate goal of a significant interest rate cut is still to prevent signs of weakness in the US economy and labor market,and to further reduce inflation.In fact,there are divergent market views on whether the 50 basis point decline exceeds expectations.This can also be seen from the Federal Reserve’s vote this time-the interest rate resolution was not unanimously passed,and Federal Reserve Governor Michelle W.Bowman voted against it,leaning towards a 25 basis point rate cut.
Returning to the theoretical relationship between interest rate cuts and oil prices,as most crude oil is currently settled in US dollars,from the perspective of pricing effects,there is a negative correlation between oil prices and the US dollar,indicating that interest rate cuts benefit oil prices.Generally speaking,after the Federal Reserve implements interest rate cuts,it will lead to a decline in the US dollar exchange rate.The decline in the US dollar exchange rate usually increases the demand for oil denominated in US dollars among investors holding other currencies,thereby pushing up oil prices.In addition,interest rate cuts will reduce loan costs,which is conducive to promoting economic development and increasing oil demand
In the analysis of Jinlianchuang,oil futures market traders have recently focused on the decisions that major central banks around the world are about to make.With the implementation of interest rate cuts in Europe and the United States in the past two weeks,the boosting effect on the oil market may begin to emerge.Overall,interest rate cuts may to some extent boost the crude oil market.It is expected that the mainstream operating range for WTI will be$69-74 per barrel,and the mainstream operating range for Brent will be$71-76 per barrel
In fact,based on intraday information,after the Federal Reserve announced a significant 50 basis point interest rate cut,the market experienced a”stress reaction”:WTI oil prices briefly rose,while US bonds and stocks surged during the same period.However,during the monetary policy press conference held by Federal Reserve Chairman Jerome Powell,they turned downward again,and WTI crude oil settlement prices closed down 1.84%.At this press conference,Jerome Powell said,”If appropriate,we can accelerate or slow down the pace of rate cuts,or even choose to pause rate cuts;this 50 basis point rate cut does not indicate that we are eager to take action
The uncertain path of future interest rate cuts also creates uncertainty in the prices of major asset classes,”said Li Xinyue,an energy and chemical researcher at Zhuochuang Information.Prior to the interest rate decision meeting,the market had already undergone a long period of tug of war betting on interest rate cuts and the magnitude of the cuts,and interest rate pricing had already begun.
The reporter noticed that on September 19th,the Brent crude oil 2411 contract reached a high of$74.77 per barrel during trading,marking the first time since September 5th that it has risen above$74 per barrel.
However,the effect of the Federal Reserve’s interest rate cuts has indeed spread.On Wednesday of this week,the central banks of Saudi Arabia,the United Arab Emirates,and Bahrain all lowered their domestic interest rates by half a percentage point after the Federal Reserve cut interest rates;Qatar,on the other hand,has been more proactive,lowering the price by 55 basis points.It is reported that this is the first time since the pandemic that Gulf countries have taken interest rate cuts to alleviate the impact of falling oil prices on energy rich regions.