Oil prices fell as investors absorbed the Federal Reserve’s interest rate fixation during yesterday’s meeting, while gold prices fell as expectations of a rate cut during the current year reduced to only once, and the dollar rose against 6 major currencies.
The Federal Reserve Bank (the US central bank) indicated that it may postpone the interest rate cut until December, while the increase in US crude oil and fuel inventories cast a shadow on the market.
Brent crude futures fell 68 cents, 0.85%, to $81.90 per barrel, at the time of preparing the report, while US West Texas Intermediate crude futures fell 75 cents, or 0.96%, to $77.74, and the two benchmarks rose by about 0.8% in the previous session.
High borrowing costs usually weaken economic growth, which may limit demand for oil.
Federal Reserve Chairman Jerome Powell noted in a news conference after the end of the two-day policy meeting that inflation had fallen without dealing a major blow to the economy, and said there was no reason to believe that could not continue.
On the supply side, data from the Energy Information Administration yesterday, Wednesday, showed that US crude inventories rose more than expected last week, largely driven by a jump in imports, and fuel inventories also increased more than expected.
Also pressuring prices was a report issued by the International Energy Agency warning of an oversupply in the near future.
Analysts at ANZ Research said, “This clearly contradicts the positive report issued by the OPEC+ group earlier this week, in which it maintained its expectations about the strength of demand.”
Traders are also monitoring the ongoing talks to reach a ceasefire in Gaza. Resolving this crisis would reduce fears of possible disruption to oil supplies from the region.
In the latest attack on maritime shipping, the Houthis claimed responsibility yesterday, Wednesday, for attacks with a small boat and missiles that damaged a coal tanker owned by a Greek company near the Yemeni port of Hodeidah on the Red Sea.
gold
Spot gold prices fell 0.31% to $1,217.81 per ounce.
“While a lower CPI reading would have been entirely supportive of gold, the Fed meeting concluded that the number of rate cuts will be reduced in 2024 and that the start of the reduction is still far away,” said Tim Waterer, chief market analyst at KCM Trade.
Dollar
The dollar rose 0.13% against 6 major currencies to 104.78 points, according to the specialized index.
Last night, the euro advanced 0.6% and exceeded its 200-day moving average, reaching $1.0802 in the latest trading.
Currencies recorded greater gains in the wake of the US inflation report, which showed consumer prices remaining stable on a monthly basis in May, versus market expectations of a 0.1% rise.
Currencies trimmed their gains after the Federal Reserve kept interest rates unchanged in a range of 5.25% to 5.5%, and policymakers’ average expectations for the number of interest rate cuts this year fell to just one from 3, in March.
