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Crude Oil Prices Decline Amid U.S. Interest Rate Concerns

23 May 2024 8:21 am
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Mumbai, 23 May (Commoditiescontrol): Crude oil prices fell for the fourth consecutive day on Thursday due to concerns that potential hikes in U.S. borrowing costs, prompted by rising inflation, could suppress oil demand.

Brent crude futures dropped by 27 cents, or 0.3%, to $81.63 per barrel, while U.S. West Texas Intermediate (WTI) crude futures decreased by 35 cents, or 0.5%, to $77.14 per barrel. Both benchmarks experienced over a 1% decline on Wednesday.

Minutes from the Federal Reserve’s latest policy meeting, released on Wednesday, indicated that the central bank might maintain its current policy rate in response to persistent inflation but also discussed the possibility of further rate increases. Higher interest rates typically elevate borrowing costs, which can restrict economic growth and reduce oil demand.

Adding to market pressures, U.S. crude inventories rose by 1.8 million barrels last week, according to the Energy Information Administration. This contrasted with expectations of a 2.5-million-barrel decrease.

On the global stage, physical crude markets are feeling the effects of reduced refinery demand and ample supply. Russia announced that it exceeded its OPEC+ production quota in April due to technical issues and plans to address this with the OPEC Secretariat, according to the Russian Energy Ministry.

Citi Research anticipates that OPEC+, which includes OPEC members and allies like Russia, will maintain its production cuts through the third quarter of this year. Citi expects Brent crude to average $86 per barrel in the second quarter of 2024.

(By Commoditiescontrol Bureau: 09820130172)

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