Following US Federal Reserve’s rate hike, Oil prices slid on Friday forfeiting some of the earlier gains over the strengthening dollar.
International benchmark Brent crude traded at $80.98 per barrel at 10.09 a.m. local time (0709 GMT) for a 0.28% decrease from the closing price of $81.21 a barrel in the previous trading session.
The American benchmark West Texas Intermediate (WTI) traded at $75.91 per barrel at the same time, a 0.26% loss after the previous session closed at $76.11 a barrel.
Dollar-indexed oil prices came under further pressure from the rising value of the greenback after the US Federal Reserve increased rates by 50 basis points, indicating further rate rises are ahead, dampening sentiment in the oil market
Fed Chair Jerome Powell said in his post-meeting press conference that history cautions against prematurely loosening monetary policy, adding: “We will stay on course (to lower inflation) until the job is done.”
“It is not important how fast we go. It is far more important to think what is the ultimate level,” he said, keeping the door open for more rate hikes next year.
Fed’s move was followed by several central banks including Mexico, Denmark, Norway, the UK, and the EU which raised interest rates and warned of further increases to come in the fight to tame inflation.
Meanwhile, a hefty and unexpected rise in the US crude oil inventories put further pressure on prices.
According to data released by the Energy Information Administration (EIA) late on Wednesday, US commercial crude oil inventories increased by around 10.2 million barrels to 424.1 million barrels, against the market expectation of a decrease of around 3.9 million barrels.
Bearish sentiment was further supported as the Keystone oil pipeline’s operator, TC Energy, resumed the part of the pipeline which was unaffected by the leak that led to its shutdown last week, but it is still unclear when the pipeline will be fully operational again.