LONDON: Oil prices fell for the fourth consecutive session on Thursday following the release of minutes from a US Federal Reserve meeting, which indicated potential for further interest rate hikes if inflation persists, as reported by Reuters. Brent crude futures decreased by 20 cents, or 0.2 percent, to $81.70 a barrel at 9:51 a.m. Saudi time. US West Texas Intermediate crude futures declined by 29 cents, or 0.4 percent, to $77.28. Both benchmarks experienced a drop of over 1 percent on Wednesday.
The minutes from the Federal Reserve’s last policy meeting, released on Wednesday, showed the central bank’s response to persistent inflation. The discussions highlighted a possibility of maintaining the current policy rate but also indicated the potential for further rate hikes if inflationary risks necessitate such measures. The minutes stated, “Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”
Higher interest rates tend to increase borrowing costs, which can suppress economic growth and reduce oil demand in the US, the world’s largest oil consumer. Additionally, the market was impacted by a rise in US crude stocks, which increased by 1.8 million barrels last week, according to the Energy Information Administration. This contrasted with an anticipated draw of 2.5 million barrels. On a global scale, physical crude markets have been pressured by weak refinery demand and ample supply.
Citi analysts noted in a Thursday report, “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.” In other developments, Russia reported exceeding its OPEC+ production quota in April due to “technical reasons” and announced plans to present a compensation plan to the Organization of the Petroleum Exporting Countries Secretariat, according to the Russian Energy Ministry.
Despite these issues, Citi maintains that OPEC+, which includes OPEC and its allies led by Russia, will uphold its production cuts through the third quarter of this year, with the next meeting scheduled for June 1. Citi also reiterated its forecast for Brent crude to average $86 a barrel in the second quarter of 2024.
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