US rate hike worries drag down oil prices

23 May 2024 , 08:48 AM

Thursday saw oil prices decline for the fourth day in a row due to concerns that rising inflation would force the US to raise interest rates once more, which would reduce demand for oil.

Brent crude futures dropped 27 cents, or 0.3%, to $81.63 a barrel. West Texas Intermediate (WTI) futures for the United States were down 0.5%, or 35 cents, to $77.14.

On Wednesday, both benchmarks dropped by more than 1%.

The Federal Reserve’s answer to sticky inflation, according to minutes from its most recent policy meeting that were made public on Wednesday, “involves maintaining” its policy rate for the time being while still discussing potential future raises.

Increased borrowing costs result in cash shortages that may deter economic expansion and decrease the demand for oil.

The Energy Information Administration reported that U.S. crude stocks increased by 1.8 million barrels last week, contrary to an anticipation of a 2.5 million barrel drop, which also had an impact on the market.

Lately, excess supply and moderate refinery demand have put pressure on the physical crude markets globally.

The Russian Energy Ministry announced late on Wednesday that Russia had surpassed its production quota for OPEC+ in April for “technical reasons” and would shortly submit its compensation plan to the Organisation of the Petroleum Exporting Countries (OPEC) Secretariat.

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