Oil Price News | Oil Prices Fall

Oil prices fell for a fourth consecutive day on Thursday after the release of the Federal Reserve's policy meeting minutes. The minutes indicated the central bank's willingness to further tighten interest rates if inflation remains elevated, potentially dampening oil demand.

• Brent crude futures dropped 0.6% to $81.44 a barrel,
• while West Texas Intermediate (WTI) futures dipped 0.7% to $77.03 a barrel.

Both benchmarks had already declined more than 1% on Wednesday.

Fed Minutes Stoke Rate Hike Fears

The Fed minutes revealed that while policymakers agreed to maintain current interest rates for now, they discussed the possibility of future hikes to combat persistent inflation.

Higher interest rates generally lead to increased borrowing costs, potentially slowing economic growth and subsequently reducing oil demand, particularly in the United States, the world's largest oil consumer.

Rising Oil Inventories

Adding to the downward pressure, data from the Energy Information Administration showed a rise of 1.8 million barrels in U.S. crude oil inventories last week, exceeding analysts' estimates of a 2.5 million-barrel decline.

Weak Demand and Ample Supply

Globally, the physical crude market has been weighed down by weak demand from refineries and an abundance of supply. Analysts at Citigroup point to recent data indicating rising oil inventories, tepid demand, and refinery margin weakness as factors contributing to the current market softness.

OPEC+ Production and Outlook

Russia acknowledged exceeding its OPEC+ production quota in April due to "technical reasons." However, the Russian Energy Ministry confirmed plans to submit a compensation plan to the OPEC Secretariat. Analysts at Citigroup still expect OPEC+, the alliance of OPEC members and allies led by Russia, to maintain production cuts through the third quarter of 2024 during their upcoming June 1st meeting. Citi also forecasts an average Brent crude price of $86 per barrel for the second quarter of 2024.

Takeaways

The Federal Reserve's stance on potentially raising interest rates, coupled with concerns about weak demand and rising inventories, is contributing to the recent decline in oil prices. While OPEC+ production cuts are expected to continue in the near term, the overall market outlook remains clouded by potential economic headwinds.