On Wednesday, oil prices fell following Tuesday’s seven-month high after the Federal Reserve paused interest rates for the fifth straight meeting.
The US West Texas Intermediate (WTI) crude futures for May delivery tumbled 1.32% to $81.64 per barrel on March 20. Market analysts anticipate a 0.54% rebound to $81.98 a barrel for the benchmark on the coming trading day.
Brent oil May futures also shed 1.40% to $86.16 a barrel, snapping a two-day winning streak. Industry watchers predict a 0.32% recovery to $86.43 per barrel in the coming market session.
Ukrainian drone strikes on Russian petrol refineries helped mitigate the decline in black gold prices. Moscow said the country’s first-quarter production had fallen by 7.00% and warned that it would reduce exports if the attacks continued.
The Energy Information Administration (EIA) also reported a draw of 1.95 million crude oil barrels in the week ending March 15. This exceeded the forecast of 0.90 million barrels and the 1.54-million-barrel reduction in the previous week.
Similarly, the American Petroleum Institute (API) posted a drop in petroleum stock of 1.52 million barrels in the same period. The reading eased from the prior decrease of 5.52 million barrels, defying market consensus of a 0.08-million-barrel build.
Federal Reserve Rate Pause Pressures Oil Prices
According to commodity specialists, higher interest rates drive oil prices downward as higher costs cause a decline in economic activity. Moreover, investors and traders remained cautious ahead of the Federal Reserve decision, with some expecting the year’s first rate cut.
The US consumer price index (CPI) rose to 3.20% year-over-year (YoY) in February, defying market consensus of 3.10%. The figure accelerated from 3.10% in January, with policymakers saying it indicated that inflation remains elevated.
As a result, the Federal Reserve retained its benchmark interest rate of 5.50%, unchanged since its July meeting. The Committee reiterated its commitment to lower rates by 75.00 basis points in 2024, reassuring oil investors and other traders.
