On Thursday, oil prices slid after the Federal Open Market Committee (FOMC) meeting minutes revealed that policymakers considered hiking interest rates.
The US West Texas Intermediate (WTI) July crude futures declined by 0.90% to $76.87 per barrel on May 24. Moreover, analysts expect a 0.23% drop to $76.69 a barrel in the following session, extending the crash to five days.
Similarly, Brent oil futures for July delivery shed 0.45% to $81.53 a barrel, extending the losing streak to four sessions. In addition, the market consensus predicts a 0.31% plunge to $81.28 per barrel in the coming trading day.
The minutes indicated that the Committee expects the monetary policy to remain restrictive for longer amid persistent inflation. Annualized consumer prices rose 3.40% in April, much faster than the Fed’s 2.00% target.
Meanwhile, crude inventory data from the Energy Information Administration (EIA) showed an addition of 1.83 million barrels in the week ending May 17 after contracting by 2.51 million barrels the week before.
The figure reversed the forecast draw of 2.40 million barrels, signaling an unexpected decline in demand.
In the same period, the American Petroleum Institute (API) reported a build of 2.48 million barrels, following the shortfall of 3.10 million barrels a week earlier. Commodity specialists anticipated another draw of 3.10 million barrels amid predictions of steady consumption.
Traders are now looking ahead to the June 1 meeting of the Organization of Petroleum Exporting Countries (OPEC) and its allies. During the assembly, the group will decide whether to continue the aggressive output cuts in the second half of 2024.
FOMC Minutes Add Heavy Pressure on Oil Prices
The FOMC minutes dashed hopes of a rate cut this year and triggered speculations of deteriorating oil demand.
Interest rate hikes often increase borrowing costs, weakening economic activity and dampening fuel consumption.
Still, the S&P Global Manufacturing Purchasing Managers’ Index (PMI) surged to 50.90 points in the preliminary estimate for May. It accelerated from 50.00 points in April and defied expectations of an unchanged reading.
Analysts, however, expect April’s durable goods index to shrink by 0.90% month-over-month (MoM) after a 2.60% rise in March. That predicts a decline in the demand for long-lasting manufactured goods, which may lead to factories reducing their oil usage.
