Oil falls over 1pc as Fed keeps interest rates unchanged

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ISLAMABAD
Crude oil prices fell on Friday following the US Federal Reserve keeping interest rates unchanged at 5.25-5.5 percent a day earlier.
As of 1220 hours GMT, Brent, the international benchmark for two-thirds of the world’s oil, shed $1.32 (-1.58 percent) to reach $82.35 a barrel. Similarly, the West Texas Intermediate (WTI), the main oil benchmark for North America, went down by $1.36 (-1.73 percent) to $77.25 a barrel.
On the other hand, the price of Arab Light increased by $0.76 (+0.92 percent) to reach $83.53 a barrel. Similarly, the price of Russian Sokol increased by $0.64 (+0.85 percent) to $76.22. However, the price for Opec Basket decreased to $81.99 a barrel with a dip of $0.83 (-1 percent).
The US Federal Reserve officials are generally unsure about when they will begin cutting interest rates, although most warned against starting too soon, the minutes from their January 30-31 meeting showed. “Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained,” the Federal Open Market Committee’s minutes read. Lower interest rates support economic growth, which fuels crude oil demand.
On the other hand, the US crude inventories, an indicator of fuel demand, rose by 3.5 million barrels in the week that ended on February 16, according to the US Energy Information Administration. Petroleum stocks fell by 300,000 barrels last week, while distillate inventories dropped by 4 million barrels, the EIA data showed.
Meanwhile, attacks on commercial ships in the Red Sea by Yemen’s Houthi rebels have added to the risk premium for oil futures. The futures curve in crude oil prices has become even more strongly downward sloped. Normally, a premium for immediate delivery versus later delivery indicates market tightness.
The Opec+ alliance, which includes Russia, has implemented voluntary supply cuts of 2.2 million barrels per day until the end of the first quarter. This reduction is in addition to the 3.6 million bpd of output reductions agreed upon earlier. The production of Opec’s 12 member countries decreased by 350,000 bpd from December to 26.24 million bpd, the group said in its February oil market report.