Minutes of a US Federal Reserve meeting reveal discussions of a further tightening of interest rates if inflation remains sticky
23 May 2024 - 07:29
byArathy Somasekhar and Sudarshan Varadhan
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Oil prices eased for a fourth consecutive session on Thursday after the minutes of a US Federal Reserve meeting revealed discussions of a further tightening of interest rates if inflation remained sticky, a move that could hurt oil demand.
Brent crude futures fell 46c, or 0.6%, to $81.44 a barrel at 4.24am GMT. US West Texas Intermediate crude (WTI) futures were down 54c, or 0.7%, at $77.03. Both benchmarks fell more than 1% on Wednesday.
Minutes released on Wednesday from the Federal Reserve’s last policy meeting showed the US central bank’s response to sticky inflation would “involve maintaining” its policy rate for now but also reflected discussion of possible further hikes.
“Various participants mentioned a willingness to tighten policy further should risks to inflation materialise in a way that such an action became appropriate,” minutes of the Fed’s meeting said.
Higher interest rates boost borrowing costs, crunching funds that could boost economic growth and oil demand in the world’s largest oil consuming nation.
Also weighing on the market, US crude stocks rose by 1.8-million barrels last week, according to the Energy Information Administration, compared with an estimate for a 2.5-million barrel draw.
Globally, physical crude markets have more recently been pressured by soft refinery demand and ample supply.
“Recent market softness has come on the back of weaker data, including rising oil inventories, tepid demand, and refinery margin weakness and the increasing risk of run cuts,” Citi analysts said in a note on Thursday.
Russia said it exceeded its Opec+ production quota in April for “technical reasons” and would soon present to oil cartel Opec secretariat its plan to compensate for the error, the Russian Energy Ministry said late on Wednesday.
Citi said it still expected that Opec+, which groups together Opec and allies led by Russia, would hold its production cuts through the third quarter of 2024 when it met on June 1.
Citi also said it continued to see Brent averaging $86 a barrel in the second quarter of 2024.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil falls after Fed hints at rate hikes
Minutes of a US Federal Reserve meeting reveal discussions of a further tightening of interest rates if inflation remains sticky
Oil prices eased for a fourth consecutive session on Thursday after the minutes of a US Federal Reserve meeting revealed discussions of a further tightening of interest rates if inflation remained sticky, a move that could hurt oil demand.
Brent crude futures fell 46c, or 0.6%, to $81.44 a barrel at 4.24am GMT. US West Texas Intermediate crude (WTI) futures were down 54c, or 0.7%, at $77.03. Both benchmarks fell more than 1% on Wednesday.
Minutes released on Wednesday from the Federal Reserve’s last policy meeting showed the US central bank’s response to sticky inflation would “involve maintaining” its policy rate for now but also reflected discussion of possible further hikes.
“Various participants mentioned a willingness to tighten policy further should risks to inflation materialise in a way that such an action became appropriate,” minutes of the Fed’s meeting said.
Higher interest rates boost borrowing costs, crunching funds that could boost economic growth and oil demand in the world’s largest oil consuming nation.
Also weighing on the market, US crude stocks rose by 1.8-million barrels last week, according to the Energy Information Administration, compared with an estimate for a 2.5-million barrel draw.
Globally, physical crude markets have more recently been pressured by soft refinery demand and ample supply.
“Recent market softness has come on the back of weaker data, including rising oil inventories, tepid demand, and refinery margin weakness and the increasing risk of run cuts,” Citi analysts said in a note on Thursday.
Russia said it exceeded its Opec+ production quota in April for “technical reasons” and would soon present to oil cartel Opec secretariat its plan to compensate for the error, the Russian Energy Ministry said late on Wednesday.
Citi said it still expected that Opec+, which groups together Opec and allies led by Russia, would hold its production cuts through the third quarter of 2024 when it met on June 1.
Citi also said it continued to see Brent averaging $86 a barrel in the second quarter of 2024.
Reuters
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