In addition to indicators of a probable rise in gasoline stocks in the United States, traders were concerned that the Federal Reserve’s widely anticipated interest rate hike would put further pressure on crude demand, contributing to the oil prices’ continued declines on Wednesday.
By 20:37 ET, U.S. crude West Texas Intermediate futures were down 0.2% to $83.73, while London-traded Brent oil futures were down 0.6% to $90.37 a barrel (00:37 GMT). Tuesday saw a more than 1% decline for both contracts.
What Is Fed’s Decision for The Rates?
After a two-day meeting, the Fed is anticipated to increase interest rates by at least 75 basis points (bps) on Wednesday. The increase will be the bank’s sixth this year as it works to control the nation’s out-of-control inflation. However, the action would tighten monetary policy in the United States, which is anticipated to impact economic activity and, in turn, oil consumption. The country’s crude consumption is already suffering due to this year’s steep increase in interest rates and excessive inflation.
The dollar increased in advance of the increase. Additionally, a higher currency makes importing oil more expensive, reducing the demand for crude abroad. A rising currency has put pressure on the crude consumption of major importers, particularly India and Indonesia.
The API’s data also revealed some waning consumer demand for crude oil in the United States. The API reported that U.S. gasoline stocks increased by 3.2M barrels last week, even the total weekly inventories increasing anticipated. The report indicated weak fuel demand in the nation even as gas prices declined from record highs, along with statistics earlier this week suggesting a decrease in U.S. Road traffic.
The official statistics from the Energy Information Administration, scheduled to be released later today, are preceded by the API data. EIA statistics show gasoline stocks decreased by 0.4M barrels last week. In response to rising worries about sluggish demand this year, oil prices have drastically declined from highs reached at the start of the Russia-Ukraine war.