Oil Prices Rises Then Falls on China’s Rate Cut and EU Debt

Jun 07, 2012

Crude oil prices initially rose after China cut interest rates for the first time since 2008 causing a strong upward spike in oil prices, but shortly after was followed by a strong contraction the US Federal Reserve warned that the US still faces economic risk from exposure to bad European debt.

US WTI (West Texas Intermediate) crude oil as well as Brent oil had declined by the end of the day to yesterday’s opening price – erasing all gains.

China – the largest manufacturing nation in the world – lowered key interest rates making borrowing cheaper. This move is designed to generate economic growth, and will have a boost to the manufacturing sector which relies heavily on oil. With the increased demand will come less supply and therefore prices will have to rise to reach a new equilibrium.