Oil prices fell – today, Friday – after statements from officials at the Federal Reserve Board (the US central bank) reinforced expectations that interest rates will remain high for a longer period, which may become more clear after the release of long-awaited US inflation data later today.
The market – which is awaiting the OPEC+ alliance’s decision to reduce production early next week – was exposed to pressure in overnight trading due to the sudden increase in US gasoline stocks.
Brent crude futures fell 0.2%, to $81.72 per barrel – at the time of writing the report – and US West Texas Intermediate crude fell 0.3% to $77.67.
Dallas Federal Reserve Bank President Lori Logan said she remains concerned about the upside potential for inflation despite the recent slowdown, warning that the US central bank must be flexible and keep “all options on the table” while monitoring the data and determining how to respond.
She added during the event, “It is really important that we do not commit ourselves to any particular monetary policy path… and I think it is too early to really think about lowering interest rates.”
For his part, Yip Jun Rong, a market expert at IG, said that the markets are cautious before key data on inflation in the United States will be released today, Friday.
The April Personal Consumption Expenditures report, which is the Federal Reserve’s preferred indicator for measuring inflation, is also scheduled for release later in the day.
The oil market has been under pressure over the past few weeks due to the possibility that borrowing costs will remain high for a longer period in the United States, which could hurt crude oil consumption.
The Energy Information Administration reported – yesterday, Thursday – that US crude oil inventories fell by 4.2 million barrels to 454.7 million barrels in the week ending May 24, compared to expectations in a Reuters poll of a withdrawal of 1.9 million barrels.
Meanwhile, gasoline inventories rose in the United States, and the Energy Information Administration said that inventories rose by 2 million barrels during the week to 228.8 million barrels, compared to expectations of a decrease of 400 thousand barrels.
The OPEC Plus alliance is working on drafting a complex agreement in order to agree on it at its next meeting – next Sunday – that would allow the extension of some of the sharp cuts in oil production until 2025, according to 3 sources familiar with the OPEC Plus discussions yesterday, Thursday.
The current reduction in OPEC Plus production – which includes the countries of the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia – is estimated at about 5.86 million barrels per day, equivalent to about 5.7% of global demand.
