On Wednesday, oil prices declined by approximately 1% to reach a one-week low. This drop followed the U.S. Federal Reserve’s decision to keep interest rates unchanged, which was widely anticipated. However, the central bank adopted a more hawkish stance, hinting at the likelihood of a future rate hike by year-end. Brent futures for November delivery decreased by 81 cents or 0.9%, settling at $93.53 per barrel, while U.S. West Texas Intermediate crude (WTI) for October delivery dropped by 92 cents or 1.0%, settling at $90.28.
Brent’s recent closing price marked its lowest point since September 13th. The October contract for WTI is set to expire on Wednesday, while the November WTI crude futures, which will become the new front-month, experienced a decrease of approximately 82 cents, reaching $89.66. Despite this decline in prices, Brent has remained in a technically overbought state for a consecutive 14 days, a streak not seen since 2012. In terms of the Federal Reserve’s perspective, policymakers anticipate that the central bank’s benchmark overnight interest rate will reach its peak this year, likely within the range of 5.50% to 5.75%, just a quarter percentage point higher than the current range.
The U.S. Energy Information Administration (EIA) reported that the decrease in crude stocks was primarily due to robust oil exports, while gasoline and diesel inventories declined as refiners initiated their annual autumn maintenance activities. Last week, crude inventories dropped by 2.1 million barrels, slightly below the 2.2 million-barrel reduction forecasted by analysts in a Reuters poll.
Simultaneously, U.S. gasoline futures reached their lowest point in a fortnight, resulting in a reduction of the gasoline crack spread, a metric used to gauge refining profitability, to its lowest level since December 2022.
In the United Kingdom, data revealed an unexpected dip in inflation in August, with the consumer price index decreasing by 0.1 percentage point to 6.7%, the lowest figure since February 2022. Goldman Sachs anticipates that the Bank of England will maintain its current interest rates in response to this decline.
Meanwhile, Japan experienced a second consecutive monthly drop in exports in August. This decline was attributed to reduced demand for steel and heavy oil from China, raising concerns about a potential economic downturn in light of elevated global interest rates.
(Source: Scott Disavino | Robert Harvey | Yuka Obayashi | Emily Chow | Nicole Jao | Marguerita Choy | David Gregorio | Bill Berkrot | Reuters)
