Fed Chair Powell’s comments signaling rate hikes later in the year limit price increases
Oil prices inched higher on Thursday after the US Federal Reserve skipped an interest rate increase, giving market players hope of an uptick in economic activity.
International benchmark Brent crude traded at $73.52 per barrel at 8.56 a.m. local time (0556 GMT), a 0.44% rise from the closing price of $73.20 a barrel in the previous trading session on Wednesday.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $68.61 per barrel, up 0.50% from the previous session’s close of $68.27 per barrel.
The US Federal Reserve skipped an interest rate increase on Wednesday, the first time since January 2022, and kept its federal funds rate unchanged at between 5% and 5.25%.
US Federal Reserve Chair Jerome Powell said Wednesday that nearly all voting members of the central bank believe further rate hikes would likely be appropriate later in the year.
Stock build-up limits price increases
Low demand in the world’s largest oil consumer, the US, has kept price hikes to a minimum, but investors are concerned about supply abundance if sluggish demand persists.
US commercial crude oil inventories increased by 7.9 million barrels during the week ending June 9, according to data released by the Energy Information Administration late Wednesday.
The rise in inventory was contrary to the American Petroleum Institute’s expectation of a fall of 1.3 million barrels.
Demand for gasoline also showed a decline last week ahead of peak travel months, as inventories grew by around 2.1 million barrels to 220.9 million barrels.
A strong US currency continues to weigh on prices, deterring importers of US-indexed crude oil.
The US 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, rose 0.33% to 102.862 early Thursday.
If the value of the US dollar increases, dollar-indexed crude oil becomes more expensive for buyers holding other currencies. In turn, less oil is bought in the market, forcing prices down.