Oil rebounds from July lows as Fed signals stoke risk-on mood

Oil climbed from a five-month low as broader markets rallied following the clearest sign yet that the US Federal Reserve’s aggressive rate-raising campaign is over.

The Fed held interest rates steady for a third straight meeting, and chairman Jerome Powell indicated policymakers are now turning their focus to when to cut borrowing costs as inflation continues to drop. The Bank of England and European Central Bank also kept rates in place on Thursday.

West Texas Intermediate rose as much as 3.8 per cent to trade above $US72 a barrel on Thursday. The Bloomberg Dollar Spot Index tumbled to its lowest since August, making commodities priced in the currency more attractive, while the equities rallied.

The Fed meeting “might just mean that the latest move to the downside has been completed,” Tamas Varga, an analyst at broker PVM Oil Associates, said in a report. “Lowering borrowing costs should weaken the dollar against other currencies, which in turn, is encouraging for oil in the physical as well as in the futures markets.”

Meanwhile, the International Energy Agency sliced nearly 400,000 barrels a day from assessments of consumption growth for the final three months of this year.

It highlighted “further weakening of the macroeconomic climate”, though it did increase its outlook for 2024 annual oil demand growth by 130,000 barrels a day.