In a market update sent to Rigzone by the Rystad Energy team late Wednesday, Rystad highlighted that the price of oil “[did] not shift… on the Fed’s cut”.
Rystad pointed out in the update that the Fed lowered its benchmark lending rate by 25 basis points, bringing it to a range of 3.50-3.75 percent, describing the action as “a move that was largely in line with expectations”.
“Fundamentals are still the primary drivers of change in commodity markets, with the price of oil not shifting based on the Fed’s cut,” Rystad noted in the statement.
“Market participants and investors are paying closer attention to the forward-looking view shared by the central bank,” it added.
“The Fed said that uncertainty about the economic outlook remains elevated, and it remains attentive to the risks to its dual mandate of achieving maximum employment and maintaining the inflation rate at two percent,” it continued.
In Rystad’s update, Claudio Galimberti, Rystad Energy Chief Economist and Global Director of Market Analysis, stated that “the Federal Reserve’s divided decision to cut rates today [Wednesday] underscores a central bank that is easing cautiously while signaling a potential pause”.
“For commodity markets, the message is clear: monetary policy is no longer a dominant driver of price direction. The Fed is cutting, but only reluctantly, and its projections show limited easing ahead despite a still-uncertain labor market and inflation that remains above target,” he added.
Galimberti noted in the update that, in the near term, the rate cut modestly loosens financial conditions and may weaken the U.S. dollar at the margin, which he pointed out is typically supportive for crude, metals, and some agricultural commodities.
He added, however, that “the signal of a pause tempers that boost, reminding markets that the Fed is unwilling to validate the two-cut easing path currently priced for next year”.
“With internal data rather than official statistics guiding this decision, the Fed is effectively buying time, not launching a sustained easing cycle,” Galimberti said.
“For energy commodities specifically, fundamentals remain the anchor,” he continued.
Galimberti went on to state in the update that oil “continues to face ample supply growth and a large supply and demand surplus”.
“These structural forces outweigh the macro impulse from a single quarter-point cut. On the other hand, metals tied to electrification and AI investment are best positioned to benefit from an improved growth outlook in 2025-2026,” he added.
“Overall, today’s [Wednesday] decision adds a mild macro tailwind but does not alter the medium-term landscape. Commodity prices will react more to fundamental signals and geopolitics shifts in the next few months than to the Fed’s tentative path,” he continued.
In a comment sent to Rigzone on Thursday, Aaron Hill, Chief Market Analyst from FP Markets, said, “as widely expected, the central bank lowered the target range to 3.50-3.75 percent in its final meeting of 2025, marking the third consecutive cut this year and representing a cumulative 175 bps since the Fed’s easing cycle began in late 2024”.
“While the rate reduction met widespread expectations, the decision was far from unanimous, with three dissents,” Hill added.
FOMC Statement
A Federal Open Market Committee (FOMC) statement issued by the Federal Reserve on the Board of Governors of the Federal Reserve System (BGFRS) website on December 10 said, “available indicators suggest that economic activity has been expanding at a moderate pace”.
“Job gains have slowed this year, and the unemployment rate has edged up through September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated,” it added.
“The committee seeks to achieve maximum employment and inflation at the rate of two percent over the longer run. Uncertainty about the economic outlook remains elevated. The committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months,” it continued.
The statement went on to note that, “in support of its goals and in light of the shift in the balance of risks, the committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-1/2 to 3‑3/4 percent”.
“In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The committee is strongly committed to supporting maximum employment and returning inflation to its two percent objective,” it added.
“In assessing the appropriate stance of monetary policy, the committee will continue to monitor the implications of incoming information for the economic outlook,” it said.
The statement went on to note that the committee “would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee’s goals”.
“The committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments,” it added.
“The committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis,” it stated.
That statement highlighted that the following voted for the monetary policy action; Chair Jerome H. Powell, Vice Chair John C. Williams, Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Philip N. Jefferson, Alberto G. Musalem, and Christopher J. Waller. It pointed out that the following voted against the action; Stephen I. Miran, Austan D. Goolsbee, Jeffrey R. Schmid.
Miran “preferred to lower the target range for the federal funds rate by 1/2 percentage point at this meeting” and Goolsbee and Schmid “preferred no change to the target range for the federal funds rate at this meeting”, the statement highlighted.
The BGFRS site notes that the FOMC consists of twelve members, “the seven members of the Board of Governors of the Federal Reserve System, the president of the Federal Reserve Bank of New York, and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis”.
The FOMC holds eight regularly scheduled meetings per year, the site states, adding that, at these meetings, the committee “reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth”.
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