Oil Prices Rebound 1% as U.S. Federal Reserve Holds Rates Steady

Oil prices rebounded by 1% on Thursday to put an end to a three-day decline as risk appetite returned to financial markets following the U.S. Federal Reserve’s decision to keep benchmark interest rates unchanged.

Brent crude oil, against which Nigerian crude oil is priced, rose by 82 cents, or 1% to $85.45 a barrel while U.S. West Texas Intermediate crude oil also saw a gain of 83 cents, or 1% to $81.27 per barrel.

Both benchmarks had previously settled at their multi-week lows in the previous trading session.

The revival in oil prices coincides with a broader upswing in financial assets that was caused by the U.S. Federal Reserve’s commitment to maintaining its benchmark interest rate at the current level between 5.25%-5.50%.

This decision has left policymakers grappling with whether financial conditions are sufficiently tight to control inflation or if an economy outperforming expectations requires further restraint.

According to Jon Maier, Chief Investment Officer at Global X ETFs,  “It is likely that the Fed will once again pause in December, keeping the door open for further hikes if necessary. This could potentially stabilize the risk-off movements experienced over the past few months.”

Meanwhile, market participants are keeping a close watch on developments in the Middle East, which have contributed to investor anxiety as a wider conflict in the region could disrupt oil supplies.

Iran’s Supreme Leader Ayatollah Ali Khamenei recently urged Muslim states to halt oil and food exports to Israel, demanding an end to its bombardment of the Gaza Strip.

Iran, an OPEC member, produced approximately 2.5 million barrels of crude per day in 2022, according to U.S. energy data.

In addition to these geopolitical concerns, investors are eagerly awaiting the outcome of the Bank of England meeting, scheduled for Thursday.

In Europe, a flash reading from Eurostat indicated that October inflation in the eurozone hit its lowest point in two years, fueling speculation that the European Central Bank is unlikely to raise interest rates in the near future.

J.P. Morgan analysts have estimated that global oil demand averaged 102.1 million barrels per day in October, slightly below their previous projection for the month.

Data from the U.S. Energy Information Administration (EIA) revealed an increase in the country’s crude stocks, as refiners undergoing seasonal maintenance restarted units more slowly than expected.

However, despite lower refining runs, U.S. gasoline stocks also saw a slight rise, climbing by 0.1 million barrels in the week to a total of 223.5 million barrels, as reported by the EIA.