Crude oil opened lower on Wednesday following a four-day rally of about 6% gain as traders await clue from U.S interest rate decision.
Brent crude oil, against which Nigerian oil is priced, traded near $82.72 a barrel from its highest close since mid-April. The gains have been fueled by signs that the global market is starting to tighten, and moves by China’s leadership revive growth in the world’s largest crude importer after its recovery faltered.
The Federal Reserve is expected to raise borrowing costs to the highest level in 22 years later Wednesday, while at the same time retaining a tightening bias that signals the possibility of another move upward later this year. Higher rates risk slowing the economy and hurting energy consumption.
Crude has pushed higher this month as supply curbs from OPEC+ heavyweights Saudi Arabia and Russia took hold, with Moscow’s exports ebbing. Markets are tightening and likely already facing a deficit of supply, according to Giovanni Staunovo, a commodities analyst at UBS AG.
The industry-funded American Petroleum Institute reported a mixed picture on crude inventories, flagging an increase of 1.3 million barrels at the national level last week, but a drop of 2.3 million at the key oil storage hub at Cushing, Oklahoma. Official figures are due later Wednesday.
“The latest US inventory data was uninspiring” as traders were looking for signs of broader tightness in the market, said Staunovo of UBS. “A Fed hike is fully priced in and traders will be looking more to the guidance” from the central bank on potential future rate increases.