Crude Oil futures rose about 2% on Thursday, marking a second straight day of gains, after the European Central Bank cut interest rates for the first time in five years and traders said they expect the Federal Reserve to follow suit in September.

Oil prices closed up more than 1% on Wednesday, ending a losing streak caused this week by OPEC+’s decision to increase supply later this year.
Wednesday’s gains came after private sector employment fell more than expected, raising hopes of a rate cut by the Fed.
Fed futures trading now suggests there is about a 70% chance the Fed will cut rates in September. Lower interest rates raise hopes of stronger economic growth and rising oil demand.
Crude Oil Prices Up as Europe Cuts Rates
Oil prices finally got some good news after a rough week. The European Central Bank (ECB) decided to make borrowing cheaper, which is like giving the European economy a shot of energy.
Cheaper borrowing in Europe could lead to a stronger European economy, which could then lead to higher demand for oil. This is why oil prices went up after the ECB’s decision.

Lower borrowing rates mean more spending by businesses and people, boosting the economy with a growing economy leads to more oil use, pushing prices up and the ECB is cutting rates to fight a slowdown in Europe’s economy.
Strong Demand on Crude Oil
OPEC Secretary-General Haitham Al Ghaith and Russian Deputy Prime Minister Alexander Novak expressed optimism about continued strong oil demand.
“Oil markets overreacted to the slightly negative outcome of the OPEC+ meeting. Demand indicators have certainly weakened somewhat recently, but they have not yet bottomed out,” Barclays analyst Amarpreet Singh wrote in a note. According to a data from the Energy Information Administration the analysts had expected a fall of 2.3 million barrels.
“Summer inventory drawdowns should be enough to lift Brent crude prices back into the high $80s to low $90s by September,” but OPEC is under pressure as weaker demand and rising supply could push prices lower in 2025, the JP analysts wrote.
Crude Oil Prices: Demand and Supply
More people using cars and factories running hot means more oil is needed, pushing prices up.
- Lower interest rates: Borrowing gets cheaper, people spend more, potentially needing more oil, again pushing prices up (like the recent ECB rate cut).
- Shift to clean energy: More people use solar panels and electric cars, reducing reliance on oil. Less demand means lower prices.

OPEC (oil producer group) decides to pump more, or other countries find new oil sources. This makes oil more abundant, lowering prices.
Analysts also added that demand indicators have weakened slightly but not fallen sharply. U.S. crude oil inventories rose by 1.2 million barrels in the week ended May 31, according to data from the Energy Information Administration.
US Federal Reserve: Center of Attention
Although the ECB decision was a positive boost to oil prices, the upcoming US Federal Reserve meeting remains a focus for market participants. Investors are now expecting the Fed to potentially cut interest rates in September, which could further boost oil prices.
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Like the ECB, the Fed may also consider cutting interest rates to stimulate US economic activity. A stronger US economy could also lead to increased oil demand and higher prices.
However, the Fed’s decisions are data-driven, with inflation and employment statistics playing a key role.
Period of Uncertainty
The oil market faces a period of uncertainty. While the ECB’s rate cut and potential Fed action in September could provide some support for prices, several factors pose challenges.
Geopolitical tensions, global economic health, and the development of alternative energy sources will all play a crucial role in determining the future trajectory of oil prices.
In the short term, market participants will be closely monitoring the US Fed’s decision and any further developments on the geopolitical front.

The next few months will likely be characterized by volatility, with oil prices potentially oscillating within a certain range.
The recent ECB rate cut provided a much-needed boost to oil prices. However, the market remains susceptible to various factors. The upcoming Fed decision and ongoing geopolitical developments will continue.