OIL PRICES DROP FOR THIRD DAY AS FEDERAL RESERVE SIGNALS HIGHER INTEREST RATES
In a dramatic turn of events, oil prices experienced a sharp decline for the third consecutive day on Wednesday. This unexpected slump was triggered by speculations that the Federal Reserve might prolong higher interest rates in the US due to persistent inflation. This development has the potential to significantly impact fuel consumption in the largest oil consumer globally, as reported by Reuters.
BRENT CRUDE AND US WTI CRUDE FUTURES TAKE A HIT
Brent crude futures took a hit, dropping by 0.9 percent to $82.17 a barrel, while US West Texas Intermediate crude futures also slipped by 0.9 percent to $77.93 as of 9:50 a.m. Saudi time. The downward trend in oil prices was further exacerbated by a 1 percent decrease in prices observed on Tuesday.
FEDERAL RESERVE SIGNALS CAUTION ON INTEREST RATE CUTS
On Tuesday, Fed policymakers emphasized the need for caution and advised waiting a few more months to ensure that inflation is truly on track towards the 2 percent target before considering any interest rate cuts. The potential increase in borrowing costs could potentially hinder economic growth and put pressure on oil demand.
US OIL INVENTORIES RISE WHILE GASOLINE PRICES FALL
Market sources revealed that US crude oil and gasoline inventories witnessed an increase last week, while distillates saw a decline, according to the American Petroleum Institute (API) figures released on Tuesday. In anticipation of the Memorial Day holiday and the commencement of the US peak summer driving season, retail gasoline prices saw a decline for the fourth consecutive week. Similarly, prices of diesel, a crucial refined product for the industrial and transport sectors, also experienced a drop.
ANTICIPATION BUILDS AROUND FED MINUTES AND US OIL INVENTORY DATA
Investors are eagerly awaiting the release of the minutes from the Fed’s recent policy meeting and the weekly US oil inventory data from the US Energy Information Administration later on Wednesday. Analysts from ANZ expressed keen interest in the Fed’s assessment of the first-quarter inflation and any hints regarding the potential timing and scale of interest rate cuts in 2024. The approach seems to be more of a cautious “wait and see” based on the available data.
EUROZONE EXPECTED TO ANNOUNCE RATE CUT AMID POSITIVE ECONOMIC OUTLOOK
In a contrasting move, the eurozone is poised to announce a rate cut on June 6 amidst a more optimistic economic outlook. European Central Bank President Christine Lagarde exuded confidence in controlling eurozone inflation during an interview aired on Tuesday.