December 14, 2023 (MLN): Oil prices remained relatively stable on Thursday after witnessing significant gains in the previous session due to bigger-than-expected weekly withdrawal from U.S. crude inventory and expectations of strong demand after the US Fed hinted a cumulative rate cut of 75 basis points in 2024.
Brent crude is currently trading at $74.69 per barrel, down by 0.06% on the day.
While West Texas Intermediate crude (WTI) is trading at $69.93 per barrel, down by 0.16% on the day.
Yesterday’s gains came after both benchmarks fell to their lowest level in six months, a descent attributed to an unforeseen uptick in consumer prices along with apprehensions regarding oversupply.
The US Federal Reserve on Wednesday decided to leave interest rates unchanged at 5.25%-5.5% for the third consecutive meeting.
Along with the FOMC statement, the FED released new projections, wherein it expected the GDP growth to be higher this year, i.e. 2.6% as against 2.1% in the September projection, while in 2024 GDP growth is projected to be 1.4% as against 1.5% in the September projection.
The projections show a significant reduction in PCE inflation, which is forecasted to be 2.8% in 2023 as against 3.4% in September projections. Moreover, it is forecasted to be 2.4% in 2024, 2.1% in 2025, and 2% by the end of 2026.
The median Federal funds rate is now projected to be 4.6% in 2024, down from 5.1% in September's projections, implying 75bps rate cuts.
To recall, the US consumer price index (CPI) for the month of November 2023 rose by 3.1% YoY, as compared to the 3% YoY numbers in October.
Meanwhile, on a sequential basis, US CPI rose by 0.1% MoM as compared to 0% MoM in the previous month.
Lower interest rates reduce consumer borrowing costs, which can boost economic growth and demand for oil. The news also sent the dollar falling for three straight sessions to a four-month low, which makes oil less expensive for foreign purchasers, as Reuters reported.
Prices were boosted by a larger-than-expected draw from the U.S. crude inventory, Teng added.
The U.S. Energy Information Administration (EIA) said energy firms pulled a bigger than expected 4.3 million barrels of crude from stockpiles during the week ended December 08 as imports fell.
Dissipating concerns about demand growth buoyed the market as well after the Organization of the Petroleum Exporting Countries (OPEC) blamed the latest crude price slide on "exaggerated concerns" about oil demand growth in its latest monthly report released yesterday evening.
Brent futures have dropped about 10% since OPEC+ announced a new round of production cuts on November 30. OPEC+ includes OPEC and allies like Russia.
Some analysts however cautioned about the rising fuel inventories for the week in the United States, which signal waning winter demand, saying that limited the market's overall upside.
"It wasn’t all good news, with gasoline and distillate inventories rising," ANZ analysts Brian Martin and Daniel Hynes said in a client note.
Copyright Mettis Link News
Posted on: 2023-12-14T10:29:38+05:00
