U.S. West Texas Intermediate crude fell by 0.7%, while Brent crude increased by 0.1%, as the U.S. Federal Reserve signaled a slower pace of interest rate cuts in 2025, which dampened market sentiment and raised concerns about future fuel demand.
On Wednesday, crude prices had risen after U.S. inventories showed a fourth consecutive weekly decline, with stockpiles falling by 934,000 barrels to 421 million, according to the Energy Information Administration (EIA). However, the market turned bearish after the Federal Reserve announced only two projected quarter-point rate reductions in 2025, citing persistent inflation. This more hawkish stance boosted the dollar to a two-year high, making oil more expensive for international buyers.
Geopolitical factors continue to influence the market. Traders are weighing a tepid demand outlook from China and robust production from non-OPEC+ countries, including the U.S., against potential supply disruptions from sanctions targeting Iran and Russia.
The oil market has largely traded within a narrow range since October, reflecting this balance of opposing forces.
Meanwhile, structural shifts in energy policy may reshape long-term demand. The U.S. Environmental Protection Agency approved California’s plan to phase out gasoline-only vehicle sales by 2035, requiring at least 80% of new vehicles to be fully electric. The policy, already adopted by 11 states, underscores a broader transition away from fossil fuels.
Despite current price pressures, the oil market appears less bearish for 2025 as OPEC+ continues production cuts and geopolitical tensions persist. Analysts anticipate that crude prices may stabilize within the $70–$75 range unless significant disruptions occur. However, subdued volatility suggests this year may see the narrowest price range since 2019, marking a shift from the sharp swings of recent years driven by the pandemic and geopolitical crises.