Concerns of oversupply soften oil prices as markets await the Fed decision

13 Dec 2023 , 09:10 AM

Concerns over oversupply and demand caused oil prices to drop more than 3% to six-month lows in the previous session. On Wednesday, they continued to decline in Asian trade.

Brent crude futures were down 1 cent at $73.23 per barrel. January’s U.S. West Texas Intermediate oil futures fell 2 cents to $68.59 per barrel.

The belief that the Federal Reserve is unlikely to lower interest rates early in the new year, which would hurt consumption, was reinforced by stronger-than-expected U.S. inflation data for November, which caused the market to slide in overnight trading.

In its most recent Short-Term Energy Outlook report, the U.S. Energy Information Administration also increased its supply prediction for 2023 by 300,000 barrels per day to 12.93 million barrels per day from its prior estimate.

Due to the pessimistic forecast, oil prices are expected to drop this week, carrying on the seven-week pattern of falls.

Rates will likely remain unchanged, as forecast by the Federal Reserve. Investors, however, will pay close attention to what Fed officials have to say about the state of the economy and interest rates in the upcoming quarters.

President Joe Biden warned that Israel was beginning to lose international support due to the death of civilians, and the UN on Wednesday passed a resolution asking for an immediate ceasefire in Gaza.

On Wednesday morning, as governments continued to argue over the future of oil and other fossil fuels, COP28 reached its last hours of discussions. On Monday, a draft agreement drew criticism for not requiring the phase-out of fossil fuels.

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