- Oil Prices Fall on Thursday Despite Low US Crude Inventories
Global oil prices fell on Thursday after the market digested Federal Reserve position on rates.
The central bank lowered interest rate by 25 basis points on Wednesday to support the U.S. economy against slowing global growth but warned this might not be the start of broad rate reduction as widely projected. The statement weighed on crude oil outlook, which has gained 2.6 percent since Monday.
Brent crude oil, Nigerian type oil, declined by $4.49 to $59.99 on Thursday, down from $64.45 a barrel it attained prior to the news. The Brent oil rebounded slightly to $62.17 a barrel on Friday morning during Asian trading session.
While the US West Texas Intermediate crude oil fell by $4.35 from $57.92 recorded on Thursday to $53.57 per barrel before paring losses to $55.27 on Friday.
“A relatively upbeat mood in risky assets took a spectacular U-turn after last night’s Fed decision. The dollar started to strengthen and equities and oil went into a kind of meltdown mode,” Tamas Varga of oil broker PVM was quoted as saying by Reuters.
The uncertainty surrounding global growth despite falling US crude inventories is disrupting OPEC’s strategy and oil outlook. With the US dollar strengthening and the Fed saying the expected economic slowdown is not as big as previously project, investors confidence in the US economy rebounded as they now likely to broadly invest in the economy against the previously predicted capital outflow. Hence, the noticeable fall in emerging haven assets.
“Supply is plentiful and demand growth is showing signs of weakening globally because of trade conflicts, Brexit and other events that tend to potentially weaken economic growth and, hence, oil demand,” Victor Shum, senior partner at IHS in Singapore, said.
“There’s a lot of oil out there. US output is growing strongly.”