Oil prices decline after Federal Reserve indicates to just one interest rate cut in 2024

13 Jun 2024 , 08:47 AM

Early on Thursday, the market was pressured by plentiful supplies of U.S. crude and fuel, and oil prices dropped as investors processed the news that the U.S. Federal Reserve would not be cutting interest rates anytime soon.

U.S. West Texas Intermediate (WTI) crude futures dropped 16 cents, or 0.2%, to touch $78.34, while Brent crude futures lost 14 cents, or 0.17%, to $82.46 a barrel. The prior session saw gains of roughly 0.8% for both benchmarks.

On Wednesday, the Federal Reserve kept interest rates unchanged and postponed the beginning of rate reductions until possibly December.

Since higher borrowing rates typically stifle economic growth, they may also reduce the demand for oil.

Following a two-day policy meeting, Fed Chair Jerome Powell told reporters that inflation has decreased without causing a significant impact on the economy and that there was no reason to believe that this couldn’t continue.

Additionally, traders are keeping an eye on the continuing negotiations in Gaza for a ceasefire, which, if successful, would allay concerns about any disruptions to supply from the oil-producing region.

In the most recent assault on commerce, Houthi militants with ties to Iran claimed credit on Wednesday for missile and small boat attacks that left a Greek-owned coal carrier in need of rescue close to Hodeidah, a port on the Red Sea in Yemen.

Since November, the militant organisation has launched attacks on foreign shipping in the Red Sea region as a show of support for the Palestinians in the conflict between Israel and Hamas.

The militant Palestinian organisation Hamas stressed its “positivity” in the ceasefire talks in a statement late on Wednesday.

It asked the United States to put pressure on Israel to agree to a deal that would result in a long-term calm in Gaza, complete evacuation from the enclave, reconstruction, and the release of Palestinian prisoners.

U.S. Secretary of State Antony Blinken stated that mediators were committed to bridging the gaps, noting that Hamas had made multiple revisions to a ceasefire proposal that the United States supported.

The Energy Information Administration (EIA) released statistics on Wednesday that revealed that, in terms of supply, U.S. crude stockpiles grew last week more than anticipated, mostly due to a spike in imports. Fuel inventories also increased more than anticipated.

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