Oil prices fall after US rate hike, but tight supply still in focus

Oil prices have taken a dive after US decided on an interest rate hike. The hike increased by the Fed Reserve by 2% overnight is the highest in more than a two and a half decades

oil prices
Representational Image
Reuters LONDON
2 min read Last Updated : Jun 16 2022 | 3:57 PM IST

By Shadia Nasralla

LONDON (Reuters) -Oil prices erased early gains to head lower on Thursday, a day after a fall triggered by a U.S. interest rate hike, though tight supply limited losses.

Brent crude futures were down 45 cents, or 0.4%, to $118.06 a barrel by 0906 GMT while U.S. West Texas Intermediate (WTI) crude futures fell 44 cents to $114.87, also off 0.4%.

Both contracts broadly stayed within the previous session's range.

Prices slipped more than 2% overnight after the Federal Reserve raised its key interest rate by 0.75%, the biggest hike since 1994.

The dollar index retreated from a 20-year high, easing downward pressure on oil prices. A stronger greenback makes U.S. dollar-priced oil more expensive for holders of other currencies, curtailing demand.

Investors remained focused on tight supplies as Western sanctions restricted access to Russian oil.

In Libya, oil output has collapsed to 100,000-150,000 barrels per day (bpd), a spokesman for the oil ministry said on Tuesday, a fraction of the 1.2 million bpd seen last year.

That is hitting already tight supply while the International Energy Agency said it expects demand to rise further in 2023, growing by more than 2% to a record 101.6 million bpd.

Optimism that China's oil demand will rebound as it eases COVID-19 restrictions is also supporting the price outlook.

"Looking into next year, there is a clear deficit in supply. While a recession could yet come along to change this, the current set-up remains bullish for the oil price and oil stocks," Bernstein analysts said in a note.

U.S. crude stocks and distillate inventories rose while gasoline inventories fell in the week through June 10, the Energy Information Administration said. [EIA/S]

Still, Bernstein estimated global inventory levels at 48 days of demand cover, below the long-term average of 55 days.

(Additional reporting by Florence Tan in Singapore and Sonali Paul in Melbourne; editing by Jason Neely)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

Topics :Crude Oil Priceoil tradeUS oil prices

First Published: Jun 16 2022 | 3:57 PM IST

Next Story