JABAR EKSPRES – Crude oil futures prices fell in late Thursday (6/15) morning trade, pressured by the prospect of further interest rate hikes by the Federal Reserve within 2023 and an unexpectedly large weekly increase in US crude oil inventories last week.
West Texas Intermediate (WTI) crude oil futures for July delivery slipped US$1.15, or 1.66 percent, to settle at US$68.27 a barrel on the New York Mercantile Exchange.
Brent crude oil futures for August delivery slipped 1.09 US dollars, or 1.47 percent, to close at 73.20 US dollars a barrel on the London ICE Futures Exchange.
Both benchmark prices had gained more than 1.5 percent earlier in the session. They rose more than three percent the previous day on expectations of rising fuel demand after China’s central bank cut short-term lending rates.
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Although the US Federal Reserve on Wednesday (6/14) kept its federal funds rate target range unchanged at 5.0 percent to 5.25 percent, Fed monetary policymakers raised its federal funds rate projection for 2023 to 5.6 percent from 5.1 percent in March, indicating that the Fed may resume rate hikes after the pause.
Market participants expect the Fed to deliver two more rate hikes within 2023 with the outlook for oil demand under additional pressure.
“The market is concerned that a higher interest rate environment will lower oil demand. The knee-jerk reaction is pushing oil down,” Price Group analyst Phil Flynn said.
Higher interest rates strengthen the dollar, making commodities denominated in the US currency more expensive for holders of other currencies.
Meanwhile, US commercial crude inventories increased by 7.9 million barrels in the week ended June 9 in contrast to market expectations for a mild decline, according to data released by the US Energy Information Agency (EIA) on Wednesday (6/14/2023).
The EIA report put pressure on the oil market but traders remained focused on the upcoming Fed decision, said Vladimir Zernov, analyst at market information supplier FX Empire.
