Oil prices also fell in Asian trade on Thursday, after posting the biggest fall in a month in the previous session, as expectations of a US interest rate hike offset the impact of a decline in US crude inventories.
Brent futures for November delivery were down 71 cents, or 0.76%, at $92.82 a barrel as of 06:08 GMT. West Texas Intermediate crude (WTI) fell 70 cents, or 0.78%, to $88.96, its lowest level since Sept. 14.
The Fed left interest rates unchanged at yesterday’s FOMC meeting as widely expected. The US Federal Reserve maintained interest rates following the Federal Open Market Committee (FOMC) meeting but strengthened its hawkish stance with a projected rate hike by the end of the year, which puts some pressure on risk assets such as oil. This hawkish pause could reduce economic growth and overall fuel demand.
Fed policymakers still think the bank’s benchmark overnight rate range will peak between 5.50% and 5.75% this year, a quarter point above the current range.
The hawkish attitude also caused the US dollar to rise to its highest level since the beginning of March, creating downward pressure on oil prices.
A stronger dollar generally makes commodities like oil more expensive for buyers using other currencies.
Energy markets showed little reaction to U.S. Energy Information Administration (EIA) data on Wednesday showing crude oil inventories fell in line with expectations last week; some analysts said the decline was smaller than they expected.
EIA data showed US inventories fell by 2.14 million barrels last week; This was well below the 5.25 million barrel decline reported by the American Petroleum Institute (API). The disappointing oil stock decline gave momentum to traders to lock in profits after a 10% gain since the start of the season.
In its weekly report, EIA stated that the decrease in stocks was largely due to strong oil exports and that gasoline and diesel stocks decreased as refineries started annual maintenance in the autumn.
However, price declines have been limited, with crude inventories at WTI delivery hub Cushing at their lowest level since July 2022 and continued concerns about tight supply globally heading into the fourth quarter with ongoing production cuts by the Organization of the Petroleum Exporting Countries and its allies.
Some analysts expect prices to remain supported in the near term.
Oil stocks view that tanks have reached their operational minimum. With Saudi Arabia’s production cuts and the broader OPEC+ alliance expected to continue for the rest of the year, oil stocks will likely reach record lows.
This squeeze, which is largely a result of the squeeze in middle distillates, combined with strong refining margins, suggests oil prices will strengthen further in the short term.