Oil prices remained relatively stable on Thursday following the anticipated reduction of the key interest rate by the U.S. central bank. Additionally, the suggestion of further rate cuts before the year’s end has heightened expectations for a potential increase in demand, driven by decreasing borrowing costs.

Brent crude futures experienced a decline of 8 cents, equivalent to 0.12%, settling at $67.87 per barrel as of 0042. U.S. West Texas Intermediate futures experienced a decline of 10 cents, representing a decrease of 0.16%, settling at $63.95. The Federal Reserve reduced its policy rate by a quarter of a percentage point on Wednesday and signaled a gradual decrease in borrowing costs for the remainder of the year, as policymakers reacted to indications of softness in the labor market. Reduced borrowing costs generally enhance demand for oil. The indication of more cuts signals that the Fed evaluates the risk to the economy from unemployment as significantly higher than that from inflation, according to Claudio Galimberti.

“For Brent in particular … the cut and the two expected by the end of the year will be a bullish factor, which will in part counter the bearish OPEC+ unwinding strategy,” he stated, alluding to the increased oil supply from members of the Organization of the Petroleum Exporting Countries and allies. Last week, U.S. crude oil stockpiles experienced a significant decline as net imports reached a historic low, while exports surged to levels not seen in nearly two years, according to data from the Energy Information Administration. However, an increase in distillate inventories by 4 million barrels, compared to market anticipations of 1 million barrels, has heightened concerns regarding demand in the leading oil-consuming nation, thereby exerting downward pressure on prices.

Global oil demand averaged 104.4 million barrels per day through September 17, reflecting a year-over-year increase of 0.520 mbd, according to a client note from JP Morgan. Year-to-date, demand increased by 0.8 mbd, slightly below the bank’s forecast of 0.83 mbd. “While flight volumes in the U.S. and China are easing as the summer travel season winds down, activity in Europe, the Middle East, and Latin America continues to grow,” JP Morgan stated.