Concerns over Increased US Interest Rates Cause Oil Prices to Decline

Oil prices continued to slide for the fourth consecutive day on Thursday, as concerns over potential interest rate hikes in the U.S. weighed on market sentiment. Brent crude futures dropped 0.3% to $81.63 a barrel, while U.S. West Texas Intermediate crude (WTI) futures fell 0.5% to $77.14.

The Federal Reserve’s minutes from its latest policy meeting indicated a cautious approach to inflation, with discussions on possible further rate hikes if necessary. This news added to the downward pressure on oil prices, as higher interest rates could dampen economic growth and reduce oil demand.

Adding to the bearish sentiment, U.S. crude stocks unexpectedly rose by 1.8 million barrels last week, according to the Energy Information Administration. This increase contrasted with expectations for a drawdown of 2.5 million barrels, further impacting oil prices.

Globally, soft refinery demand and ample supply have also been weighing on physical crude markets. Russia’s announcement that it exceeded its OPEC+ production quota in April for “technical reasons” added to the negative sentiment in the market.

Despite the current challenges, Citi Research remains optimistic about OPEC+ maintaining its production cuts through the third quarter of this year. The group is expected to meet on June 1, with Citi projecting Brent crude to average $86 a barrel in the second quarter of 2024.

Overall, the uncertainty surrounding inflation, interest rates, and supply dynamics continues to influence oil prices, keeping traders on edge in the volatile energy market.