Oil rises with US demand optimism driven by stocks draw, Fed decision

By Sibel Morrow

Oil prices increased on Thursday over strong demand expectations in the US after a fall in the country’s crude oil stockpiles, and over the decision to maintain interest rates despite signs of interest rate decreases next year.

International benchmark crude Brent traded at $74.74 per barrel at 10.58 a.m. local time (0758 GMT), a 0.65% increase from the closing price of $74.26 a barrel in the previous trading session on Wednesday.

The American benchmark, West Texas Intermediate (WTI), traded at the same time at $69.83 per barrel, up 0.52% from Wednesday's close of $69.47 per barrel.

After recording steep declines in previous trade, both benchmarks rebounded after industrial data revealed an upsurge in demand in the US, the world’s largest crude oil consuming country.

According to data released by the Energy Information Administration (EIA) on Wednesday, US commercial crude oil inventories decreased by 4.3 million barrels compared to the American Petroleum Institute's expectation of a fall of around 1.5 million barrels.

However, gasoline inventories rose by around 400,000 barrels, limiting further price upticks.

- US Fed decision lowers dollar value, encourages investors

Prices came under upward pressure following the US Federal Reserve's (Fed) announcement that it will forego an interest rate hike for the fourth time this year and maintain the federal funds rate at between the 5.25%-5.5% target range – the highest in 22 years.

The possibility of a soft landing for the US economy and expectations of a decrease in oil demand supported higher prices.

The central bank’s projections revealed at least three interest rate cuts in 2024, while also indicating the possibility of an additional four rate cuts of 25 basis points each in 2025.

The Fed Chair Jerome Powell said in his post-meeting news conference that the question of lowering interest rates, which members of the Federal Open Market Committee discussed during the meeting, is “beginning to come into view.”

Powell, meanwhile, warned of the risk of a recession in the US.

The Fed’s decision also negatively impacted the dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc.

The dollar index fell 0.09% to 102.38, encouraging oil-importing countries to purchase more crude oil at cheaper dollar prices.