Oil stabilizes after falling in response to the UK interest rate increase

23 Jun 2023 , 10:54 AM

Early Friday trading saw little movement in oil prices, but the week’s price decline was predicted to be 3% due to concerns about the outlook for fuel demand following a larger-than-expected interest rate hike in the UK and warnings about impending rate hikes in the United States.

While U.S. West Texas Intermediate (WTI) crude futures were down 11 cents, or 0.2%, at $69.40, Brent futures were down 7 cents, or 0.1%, to $74.07 per barrel.

After the UK’s central bank increased interest rates by half a percentage point, which sparked concerns that an economic downturn would reduce fuel demand, both benchmarks had fallen by approximately $3 the previous session.

Support for the rate increase overshadowed an unexpected decline in U.S. oil stocks.

For a look on industrial activity and demand trends, the market is now anticipating the release of Purchasing Managers Indexes (PMIs) from around the world on Friday.

Surveys released on Friday indicated that as company confidence and demand declined, Japan’s manufacturing activity resumed contraction in June and the country’s service sector growth slowed for the first time in seven months.

In the United States, Federal Reserve Chair Jerome Powell stated that the institution would raise interest rates going forward at a ‘careful pace’ as decision-makers get closer to finishing their record round of tightening monetary policy.

Higher interest rates make it more expensive for businesses to borrow money.

According to the Energy Information Administration, high export demand and low imports contributed to an unexpected draw in U.S. oil stocks over the last week. However, stockpiles of gasoline and distillates increased.

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