Oil Prices Fall as Fed Delays Rate Cut
In a tumultuous early trade on Thursday, oil prices took a hit as investors processed the news that the US Federal Reserve had likely postponed an interest rate cut until December. The market was further weighed down by ample US crude and fuel stocks, according to Reuters.
Market Reaction
Brent crude futures dipped 37 cents, or 0.5 percent, to $82.23 a barrel, while US West Texas Intermediate crude futures fell 34 cents, or 0.4 percent, to $78.16. Both benchmarks had seen a modest increase of about 0.8 percent in the previous session.
Fed’s Decision
The Fed’s decision to keep rates unchanged and delay policy easing until possibly December caused concerns among investors. Higher borrowing costs can hinder economic growth, potentially leading to a decrease in oil demand.
Fed Chair Jerome Powell expressed confidence in the economy during a press conference after the policy meeting, stating that inflation had decreased without major repercussions, and that this trend could continue.
Supply Concerns
US crude stockpiles surged more than expected last week, driven primarily by a rise in imports. Additionally, fuel inventories saw a higher-than-anticipated increase, as reported by the Energy Information Administration on Wednesday.
The International Energy Agency’s bearish report warning of excess supply also put pressure on oil prices, contrasting with a more optimistic outlook from OPEC+ earlier in the week.
Geopolitical Factors
Traders are closely monitoring negotiations for a ceasefire in Gaza, as a resolution could alleviate concerns about potential disruptions in the oil-producing region.
In a recent incident, Iran-allied Houthi militants claimed responsibility for attacks on a Greek-owned coal carrier near Yemen’s Red Sea port, highlighting ongoing tensions in the region.
Meanwhile, Hamas issued a statement expressing willingness to engage in ceasefire talks, with US Secretary of State Antony Blinken noting efforts to bridge the gaps in negotiations.