Global oil prices fell on Thursday as the United States Federal Open Market Committee (FOMC) raised interest rates by 75 basis points on inflation concerns.
This was after the committee had earlier hiked rates by 25 basis points in March to curtail consumer prices. In May, consumer prices jumped to 8.6% forcing the Fed to raise rates by the most since 1994.
The decision dragged on commodity prices as oil traders and investors started cutting down on their positions amid the projected slowdown in global growth due to an increase in input prices.
Brent crude oil, the international benchmark for Nigerian oil, dropped to $115.96 a barrel during the Asian trading session from about $122 it traded on Wednesday before paring losses to $117.62 as of 2:00 pm Nigerian time.
U.S West Texas Intermediate crude oil was hovering around $112.23 a barrel at the time of writing.
On Thursday, the Bank of England (BoE) followed the Fed and raised interest rates by 25 basis points to contain its inflation already at 11%.
“The scale, pace and timing of any further increases in Bank Rate will reflect the Committee’s assessment of the economic outlook and inflationary pressures,” the BoE said.
Stocks in the Euro-area are trading downward after the Swiss National Bank surprisingly raised its policy rate from -0.75% to -0.25% for the first time in 15 years. Like other central banks, the inflation rate has been on the increase in Switzerland in recent months and presently it is at almost 3%.
“Concerns about global inflation are growing. As a result, the dollar is stronger and European equities are falling, bringing oil down with them,” PVM analyst Tamas Varga said.
“This is why oil buyers are currently on the backfoot but since supply issues are still very much present, I believe that the move lower, which started on Tuesday, will not be a prolonged one.”
